Obama: 'Iraq Combat Mission To End In 2010'
A transitional force of between 35,000 and 50,000 personnel will remain in the country to support the Iraqi government and security forces.
"Let me say this as plainly as I can: by August 31, 2010, our combat mission in Iraq will end," the President said.
Mr Obama confirmed he intended to remove all US troops from Iraq by the end of 2011, under the Status of Forces Agreement signed with the Iraqi government last year.
In a speech at the Camp Lejeune Marine base in North Carolina he added: "There will surely be difficult periods and tactical adjustments.
"But our enemies should be left with no doubt: this plan gives our military the forces and the flexibility they need to support our Iraqi partners, and to succeed."
Sky's political editor Adam Boulton described the style of Mr Obama's announcement as "sober".
"It was a very sober speech because the President did not need to remind his audience that more than 4,000 US military personnel have lost their lives in Iraq," he said.
During his campaign for the presidency, Mr Obama said he wanted all US troops out of Iraq within 16 months of taking office.
The timetable for withdrawal he has announced, involving roughly 100,000 troops, is around two months longer.
"As we carry out this drawdown, my highest priority will be the safety and security of our troops and civilians in Iraq," Mr Obama said.
"We will proceed carefully, and I will consult closely with my military commanders on the ground and with the Iraqi government."
The transitional force which remains will train and equip Iraqi forces, protect civilian reconstruction projects and conduct limited counter-terrorism operations.
Sky's US political analyst and former Clinton aide Jon-Christopher Bua said: "Campaigning is done in poetry, governing is done in the hard reality of prose.
"The President wants to make good on his promise to pull out troops but will listen to his commanders as to exactly when.
"He made both a strong policy and political stand and did so with the support of the military, many Republicans including Senator John McCain, and most but not all of the politicians here in Washington.
"Both Democratic House Speaker Nancy Pelosi and Senate Leader Harry Reid are not terribly happy about the timeline of for withdrawal.
"Mr Obama has earned the respect of the military brass who believe he is well-prepared and pragmatic when he meets, listens, and ultimately makes his own decisions."
Mr Obama phoned Iraqi prime minister Nuri al Maliki and former President George Bush to brief them ahead of his announcement, the White House said. 
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