Later In a speech to the Marines at Camp Lejeune, he said he'll withdraw America's combat brigades from Iraq over the next 18 months.
He said his administration will "proceed cautiously" on the withdrawal and that U.S. commanders will bring it about in close consultation with the Iraqi government.
"The most important decisions that have to be made about Iraq's future must now be made by Iraqis," Obama said.
During his campaign for the presidency, Obama had advocated pulling troops out within 16 months of taking office. The timeline he announced Friday, involving roughly 100,000 troops, was two months longer. It still hastens the U.S. exit, nevertheless.
Obama also said that between 35,000 and 50,000 troops will initially remain there to help train Iraqi forces and undertake counter-terrorism missions.
The news was greeted warmly by his audience.
"I think that the war is over and there is no need for us to be out there," said Pvt. Angel Vargas, Fort Bragg soldier. "I'm glad I voted for Obama and he is keeping his word."
Obama called the Iraq withdrawal a necessity, both for the future of Iraq and to allow the U.S. to refocus its attention more firmly on Afghanistan.
"We cannot rid Iraq of all who oppose America or sympathize with our adversaries," he said. "We cannot police Iraq's streets until they are completely safe, nor stay until Iraq's union is perfected. We cannot sustain indefinitely a commitment that has put a strain on our military, and will cost the American people nearly a trillion dollars."
The President also scored points with the Marines when he spoke about the tremendous debt that America owes them and the members of other branches of the military who have served in Iraq and Afghanistan.
He told them he was going to increase the number of soldiers and Marines to lessen the strain on their families caused by long deployments. He also promised the military pay raises and better benefits.
The President said he intends to take a lesson from history. He echoed remarks he made earlier this week to a joint session of Congress and pointed to the way the GI Bill helped thousands of soldiers form the backbone of the American middle class after World War II by allowing them to go to college. He said he wants a similar program now.