"Today, the discriminatory law known as 'Don't Ask, Don't Tell' is finally and formally repealed," Obama said in a statement. "As of today, patriotic Americans in uniform will no longer have to lie about who they are in order to serve the country they love."
The repeal went into effect on Tuesday, ushering in a new era in the US armed forces. The law had allowed gay men and women to serve in the military only if they kept their sexual orientation a secret. They faced the threat of being kicked out of the military if they were open about their homosexuality.
Obama last December signed legislation to repeal the policy known as "Don't Ask, Don't Tell," which had been passed by Congress and signed into law in 1993 under then-president Bill Clinton.
Defense Secretary Leon Panetta made it clear that the US military would not tolerate mistreatment of gays in the ranks.
"This is an historic day for the Pentagon and for the nation," he said. "We have a zero tolerance with regards to harassment," Panetta told a Pentagon briefing.
Under the "Don't Ask, Don't Tell" policy, more than 14,500 US service members were thrown out of the military since it went into effect in 1993, according to the Servicemembers Legal Defense Network.
Gay rights groups for years denounced the law and called its end a important milestone in the fight against anti-homosexual discrimination. Some have compared its demise to the integration of the US armed forces.
"Today, every American can be proud that we have taken another great step toward keeping our military the finest in the world and toward fulfilling our nation's founding ideals," Obama said.
Opponents of lifting the ban had argued that allowing openly gay people to serve in the military could harm US troops' combat effectiveness. Marine Corps Commandant James Amos had said that implementing the change could cost lives because of the impact on discipline and unit cohesiveness.
Some conservative activists condemned the change.
"The American military exists for only one purpose -- to fight and win wars," Tony Perkins, president of the conservative Family Research Council, said in a statement.
"Yet, today, the US military became a tool in reshaping social attitudes regarding human sexuality. Using the military to advance a liberal social agenda will only do harm to the military's ability to fulfill its mission," Perkins added.
The Pentagon said military recruiters are now accepting enlistment applications from openly gay people.
Navy Admiral Mike Mullen, the top US military officer, said allowing gays to serve openly is "a matter of integrity."
"And today, with implementation of the new law fully in place, we are a stronger joint force, a more tolerant joint force, a force of more character and more honor, more in keeping with our own values," Mullen told reporters.
Repeal of "Don't Ask, Don't Tell" is an important development in the gay rights movement in the United States, which has seen progress in its goal of legalizing same-sex marriage.
Six US states -- New York, Connecticut, Iowa, Massachusetts, New Hampshire, Vermont as well as Washington, D.C., now allow same-sex marriage.
