He said US participation in the coalition had saved "countless lives", but that overthrowing Muammar Gaddafi by force would be a mistake.
Having led the initial campaign, the US would hand over to Nato allies on Wednesday, he said.
The rebel advance has been halted near Col Gaddafi's birthplace, Sirte.
Anti-Gaddafi forces had made rapid progress westwards from their stronghold in Benghazi in recent days, greatly aided by international air strikes.
But rebel fighters said pro-Gaddafi forces had used heavy weaponry to check their advance some 50km (30 miles) east of Sirte, says the watchersNplayers's Ben Brown in Ajdabiya.
In eastern Libya, rebel radio has been urging more people in the west of the country to join the anti-Gaddafi uprising.
While Nato insists it is impartial in the conflict, Russia has renewed its expressions of concern, saying intervention in an internal civil war is not sanctioned by UN Security Council Resolution 1973.
Some 40 delegations - from the coalition, the UN, Nato, the African Union and Arab League, but not the Libyan government - are preparing to meet in London later on Tuesday to discuss the way forward for Libya. Rebel officials are in London for talks on the meeting's sidelines, although they have not been invited to the conference itself.
In a letter to those attending the conference, Col Gaddafi called for an end to the "barbaric offensive" on his country.
'Regime change' ruled out"We have stopped Gaddafi's deadly advance," said Mr Obama, speaking from the National Defense University in Washington DC.
"Because of this transition to a broader, Nato-based coalition, the risk and cost of this operation - to our military, and to American taxpayers - will be reduced significantly," Mr Obama said.
"We must always measure our interests against the need for action," the president continued. "But that cannot be an argument for never acting on behalf of what's right."
Earlier on Monday, in a video conference with French President Nicolas Sarkozy, German Chancellor Angela Merkel and UK Prime Minister David Cameron, Mr Obama had agreed that Col Gaddafi "had lost any legitimacy to rule and should leave power, and that the Libyan people should have the political space to determine their own future", the White House said.
Advance slowsAn Italian proposal to end the crisis includes offering Col Gaddafi an escape route from Libya, ensuring a quick ceasefire and facilitating dialogue between rebels and tribal leaders.
Foreign Minister Franco Frattini said he had discussed the proposals with Germany and France.
Libyan Deputy Foreign Minister Khaled Kaim, meanwhile, has called on those attending Tuesday's conference in London to act as "peacemakers, not warmongers".
In recent days, anti-Gaddafi forces have seized a number of coastal communities and important oil installations, including Ras Lanuf, Brega, Uqayla and Bin Jawad.
However, repeated attacks by government troops have prevented them reaching Sirte, a symbolic target for the rebels as the birthplace of Col Gaddafi.
A Pentagon spokesman in Washington, Vice Admiral Bill Gortney, said that because the Libyan rebels were not well organised, any military gains they made would be tenuous.
He said the rebels were clearly benefiting from actions of the US, which has started using heavily-armed low-flying aircraft against government forces.
Nato has denied that its air strikes are meant to provide cover for a rebel advance.
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