In a statement, Obama said he signed the legislation, called the HIV Organ Policy Equity Act, or HOPE Act, to offer the opportunity for HIV-positive person to receive organ donations, Xinhua reported.
The move will save lives and strengthen the national supply of organs too.
For decades HIV organ transplants have been illegal in the US and it was even illegal to study whether they could be safe and effective, the U.S. president said, calling the ban "outdated".
"The potential for successful organ transplants between people living with HIV has become more of a possibility," Obama said.
"The HOPE Act lifts the research ban, and, in time, it could lead to life-saving organ donations for people living with HIV while ensuring the safety of the organ transplant process and strengthening the national supply of organs for all who need them."
He also said the HOPE Act, which received bipartisan approval in both houses of Congress earlier this year, "marks an important step in the right direction" because improving care for people living with HIV is critical to fighting the epidemic.