Speaking at the Justice Department, Obama outlined his plan to pull back some of the NSA's surveillance programmes, seven months following the disclosures of the secret surveillance programmes by formal defence contractor Edward Snowden.
Among the proposals, Obama said he was seeking to alter the bulk collection of domestic phone records, known as Section 215 of the USA Patriot Act.
"I am therefore ordering a transition that will end the Section 215 bulk metadata programme as it currently exists, and holding this bulk metadata," said the president.
Obama said he was seeking to alter Section 215 of the USA Patriot Act
Obama has been carefully evaluating for weeks the 46 recommendations brought up by an outside advisory group appointed by himself.
The panel called for "a series of significant reforms" to enhance transparency and privacy to the controversial NSA surveillance programmes. The panel recommended that the government's current bulk storage of telephone metadata should instead be held either by private providers or by a private third party.
"This will not be simple," Obama said, adding that both options pose "difficult problems".
He directed Attorney General Eric Holder and the intelligence community to develop alternative options and report back to him before March 28.
The president's much-anticipated move is aimed to calm the furor and controversy at home and abroad following leaks by Snowden. But before laying out his plans, he seized the chance to defend the core of the US surveillance practices again in the post 9/11 period.
Obama also criticised Snowden's "sensational" way of disclosures that has often "shed more heat than light".