"Today, we have taken the final major step toward ending the discriminatory 'Don't Ask, Don't Tell' law that undermines our military readiness and violates American principles of fairness and equality," Obama said in a statement yesterday.
His statement came after he signed a certification with Defence Secretary Leon Panetta and the top US military officer, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, that the US military was ready to accept gay troops.
The repeal of the ban, dubbed "Don't Ask, Don't Tell," will now come into force in 60 days' time, on September 20.
The ban was overturned in a law adopted in December that first required the top military officer, the defence secretary and the president to certify that the change would not harm military readiness and that the armed forces were ready to carry it out.
In the interim, the Pentagon has drawn up new manuals and prepared the entire armed forces, some 2.3 million people who serve as both active troops and reservists, for the new policy.
"As of September 20th, service members will no longer be forced to hide who they are in order to serve our country," Obama said.
"Our military will no longer be deprived of the talents and skills of patriotic Americans just because they happen to be gay or lesbian."
Former soldiers and gay rights groups have fought for years to overturn the ban, which was introduced in 1993 as a compromise after military chiefs rejected a bid by former president Bill Clinton to open the doors to gay soldiers.
"Don't Ask, Don't Tell" required gay troops to keep quiet about their sexual orientation or face expulsion from the forces, and since 1993, an estimated 14,000 service members have been kicked out of the military under the rule.