In his annual State of the Union message to Congress, Obama called on Congress to give a chance to diplomatic efforts to resolve Iran's nuclear programme and vowed to veto any new sanctions.
Diplomacy and tough sanctions led Tehran to halt progress on its nuclear programme for the first time in more than a decade, giving Obama a chance to tout progress in a speech beset with repeated calls for action on stalled plans in other areas.
Still, success on Iran remains far from certain, with Obama warning: "These negotiations will be difficult. They may not succeed."
Iran started scaling back its nuclear activities last week, and the United States and the European Union have eased some sanctions, under a short-term agreement reached in November to allow for talks to reach a longer-term deal.
"For the sake of our national security, we must give diplomacy a chance to succeed," Obama said, noting he would call for new sanctions if negotiations fail.
"But if Iran's leaders do seize the chance, then Iran could take an important step to rejoin the community of nations, and we will have resolved one of the leading security challenges of our time without the risk of war."
The remarks on Iran were among the most extensive foreign policy points in an address primarily focussed on economic inequality at home.
The Republican chairman of the House panel on foreign affairs, Ed Royce, bristled at Obama's veto threat and insisted that the Iran deal "hardly makes us more secure."
He also chided the president for not even mentioning the North Korean nuclear threat.
Obama vowed continued support of Afghanistan after 2014, and repeated calls for Afghan President Hamid Karzai to sign the security agreement with the United States that he has been reluctant to ink.
"After 2014, we will support a unified Afghanistan as it takes responsibility for its own future," Obama said.
If Karzai signs the security agreement, the US will keep a "small force of Americans" in Afghanistan to help with training and counterterrorism operations, Obama said, without specifying how many US troops might remain. The White House has said if Afghanistan does not sign the agreement it would consider pulling out of the country completely.
"For while our relationship with Afghanistan will change, one thing will not: our resolve that terrorists do not launch attacks against our country," he said.
Obama also called on Congress to lift restrictions on transferring detainees from the prison at Guantanamo Bay, Cuba so that it can be closed this year.
"With the Afghan war ending, this needs to be the year Congress lifts the remaining restrictions on detainee transfers and we close the prison at Guantanamo Bay - because we counter terrorism not just through intelligence and military action, but by remaining true to our constitutional ideals, and setting an example for the rest of the world," Obama said.
He mentioned only in passing the controvery over extensive spying by the National Security Agency, noting ordinary people need to have confidence that their privacy is not being violated by US surveillance efforts.
Obama said he would work with Congress to reform surveillance programmes under a plan he outlined this month.
He also said he would seek congressional authority to negotiate streamlined trade treaties, asking Congress to pass so-called fast-track legislation.
"New trade partnerships with Europe and the Asia-Pacific will help (US exporters) create more jobs," he said, and "open new markets to new goods stamped 'Made in the USA.'"
The proposed Trans-Pacific Partnership - including the United States and countries from Asia and the Americas - could be the first beneficiary if Congress reauthorizes fast-track authority, under which trade treaties can be submitted without amendment for passage by both chambers.
A proposed free-trade deal is also being negotiated with the European Union.