Obama termed these terms as non-negotiable, but said the US would not deploy ground troops in Libya and would not resort to use of force beyond a well-defined goal, specifically the protection of civilians in Libya.
UN Security Council today approved imposing a no-fly zone over battle-torn Libya and authorised all necessary measures to protect civilians.
"Now, once more, Muammar Gaddafi has a choice. The resolution that passed lays out very clear conditions that must be met. The United States, the United Kingdom, France and Arab states agree that a cease-fire must be implemented immediately," he said.
"That means all attacks against civilians must stop. Gadhafi must stop his troops from advancing on Benghazi; pull them back from Adjadbiya, Misrata and Zawiya; and establish water, electricity and gas supplies to all areas," he added.
"Humanitarian assistance must be allowed to reach the people of Libya," Obama said in his remarks to the press at the White House.
"Let me be clear, these terms are not negotiable. These terms are not subject to negotiation. If Gadhafi does not comply with the resolution, the international community will impose consequences, and the resolution will be enforced through military action," Obama asserted.
In this effort, the United States is prepared to act as part of an international coalition. American leadership is essential, but that does not mean acting alone. It means shaping the conditions for the international community to act together, he noted.
The Secretary of State, Hillary Clinton, and the Defence Secretary, Robert Gates, will travel to Paris for a meeting with European allies and Arab partners about the enforcement of Resolution 1973, he said.
"We will provide the unique capabilities that we can bring to bear to stop the violence against civilians, including enabling our European allies and Arab partners to effectively enforce a no-fly zone," she said.
"I have no doubt that the men and women of our military are capable of carrying out this mission. Once more, they have the thanks of a grateful nation, and the admiration of the world," Obama said.
"I also want to be clear about what we will not be doing. The United States is not going to deploy ground troops into Libya, and we are not going to use force to go beyond a well-defined goal, specifically the protection of civilians in Libya.
"In the coming weeks, we will continue to help the Libyan people with humanitarian and economic assistance so that they can fulfill their aspirations peacefully," he said.
Obama said the developments in Libya is just one more chapter in the change that is unfolding across the Middle East and North Africa.
"From the beginning of these protests, we made it clear that we are opposed to violence. We''ve made clear our support for a set of universal values, and our support for the political and economic change that the people of the region deserve," he said.
"But I want to be clear that change in the region will not and cannot be imposed by the United States or any foreign power.
Ultimately it will be driven by the people of the Arab world. It is their right and their responsibility to determine their own destiny," Obama said.
Earlier Clinton said, "We would have to see actions on the ground, and that is not yet at all clear. We will continue to work with our partners in the international community to press Gadhafi to leave, and to support the legitimate aspirations of the Libyan people."