He also announced a significant shift in the U.S. position on the Israel-Palestinian conflict.
Speaking at the State Department, which he called "a fitting venue to mark a new chapter in American diplomacy," Obama for the first time since popular uprisings began sweeping Arab countries late last year addressed the collective yearning for democratic reforms across the region -- what he called "a longing for freedom."
"For six months, we have witnessed an extraordinary change taking place in the Middle East and North Africa," he said. "Square by square, town by town, country by country, the people have risen up to demand their basic human rights."
Declaring "there must be no doubt that the United States of America welcomes change that advances self-determination and opportunity," Obama sought to erase ambiguity about U.S. loyalties by firmly aligning the United States with the citizens calling for change, not their leaders, many of who are longtime U.S. allies.
"The United States of America was founded on the belief that people should govern themselves," he said. "Now, we cannot hesitate to stand squarely on the side of those who are reaching for their rights, knowing that their success will bring about a world that is more peaceful, more stable, and more just."
'The Path Of Murder'
He said America has an "historic opportunity" to show that it "values the dignity of the street vendor in Tunisia more than the raw power of the dictator."
In that spirit, the U.S. leader delivered his strongest message yet to Syrian President Bashar al-Assad, who he said has "chosen the path of murder and mass arrests" in response to two months of peaceful demonstrations for reforms. Assad must lead his country in a peaceful democratic transition "or get out of the way," Obama said.
Some 850 people have died in the Syrian regime's crackdown and thousands have been arrested. Washington's response has been criticized as muted in deference to a strategic calculation that Damascus might loosen its ties with Tehran. Obama's words today, and the new sanctions he authorized on May 18 on Assad and six senior Syrian officials, signaled a sharp break with that diplomatic approach.
U.S. foreign policy in the region has been seriously tested throughout six months of upheaval, and the Obama administration has been criticized for its inconsistent response to each country experiencing a popular democratic uprising.
In Egypt, support for longtime U.S. ally Hosni Mubarak only waned after weeks of street demonstrations, and though Obama finally did call on Mubarak to leave, he has not done the same in Bahrain, where the royal family has beaten and killed citizens demanding more freedoms.
U.S. forces are helping NATO drive Libya's Muammar Qaddafi from power but until today Washington had stayed largely quiet about Assad's similarly brutal treatment of his own people in Syria.
'Follow Through' Needed By Yemen
Obama said Bahrain -- which he called "a long-standing partner" -- must begin a dialogue with members of its opposition, many of whom first need to be released from jail. He urged Yemen's President Ali Abdullah Saleh to "follow through on his commitment to transfer power," in an agreement brokered by the Gulf Cooperation Council.
Obama said the United States would support the calls for democratic change, even though it might run counter to its strategic interests in the region.
"There will be times when our short-term interests do not align perfectly with our long-term vision of the region. But we can -- and will -- speak out for a set of core principles -- principles that have guided our response to the events over the past six months," Obama said.
That support, he said, will take the shape of more assistance to civil society, outreach via social media as a way to listen to the voices of the people -- especially young people -- and important economic aid aimed at encouraging job growth and investment in the future.
"Our message is simple: If you take the risks that reform entails, you will have the full support of the United States," he said.
The White House has announced that it will cancel some $1 billion of Egypt's debt to free up money that can be used to invest in jobs and entrepreurship, and will guarantee up to $1 billion in loans for Egypt through the Overseas Private Investment Corporation, a U.S. government institution that mobilizes private capital.
Return To Israel's 1967 Borders
Obama also seized the historic moment to announce a significant shift in the U.S. position on the Israel-Palestinian conflict. For the first time, he publicly called for Israel to agree to a Palestinian state based on borders that existed in 1967, before the Six-Day War led to the Israeli occupation of East Jerusalem, Gaza, and the West Bank.
"The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps," Obama said, "so that secure and recognized borders are established for both states. The Palestinian people must have the right to govern themselves, and reach their potential, in a sovereign and contiguous state."
By endorsing one of the Palestinian's key demands, Obama walked a delicate diplomatic line between U.S. support for Israel and its desire to break a decades-old impasse that has tainted U.S. relations with the Arab world.
"At a time when the people of the Middle East and North Africa are casting off the burdens of the past, the drive for a lasting peace that ends the conflict and resolves all claims is more urgent than ever," he said.
He said the U.S. commitment to Israel's security "is unshakeable," but the deep friendship between the two countries compels a blunt statement of fact -- namely, that "the status quo is unsustainable, and Israel too must act boldly to advance a lasting peace."
"What America and the international community can do is state frankly what everyone knows: A lasting peace will involve two states for two peoples -- Israel as a Jewish state and the homeland for the Jewish people, and the state of Palestine as the homeland for the Palestinian people, each state enjoying self-determination, mutual recognition, and peace," Obama said.
But Obama also rejected a plan by Palestinians to push for United Nations recognition of statehood this fall, saying, "Symbolic actions to isolate Israel at the United Nations in September won't create an independent state."
Haim Malka, the deputy director of the Middle East program at the Center for Strategic and International Studies, said Obama successfully communicated the idea that although America did not inspire the popular uprisings across the region, it does have a stake in their success.
"People in the Arab world felt that this was an Arab moment -- that it was people in the region that really led these uprisings, led the revolts, led to the changes in government in Tunisia and Egypt. They don't want anyone to take that away from them," he said. "I think the president struck a balance: He tried to tell Americans how the change in the region is connected to the United States, he acknowledged that this is an Arab moment, but he also acknowledged that the United States does have a role to play."
Samer Shehata, assistant professor of Arab politics at Georgetown University, said Obama failed to fully explain the inconsistencies in U.S. policies toward various countries in the region, but did effectively communicate U.S. support for a universal set of values that includes political freedoms and human rights.
But he predicted that among Arabs, the impact of Obama's words would be minimal.
"I think that it would be a mistake to think that everyone is sitting at the edge of their seat in the Arab world waiting for the pronouncements of Mr. Obama. As the events of the last four months or so have demonstrated, the fates and the history of the Arab world is being written by Arabs, and the United States has some impact on that, but it's certainly not the decisive factor," Shehata said.
Regional reaction to Obama’s 1967 border proposal was swift.
Palestinian President Mahmud Abbas voiced appreciation for Obama's efforts to resume peace talks, saying through a spokesman that he welcomed the efforts to reach a final status agreement.
But Hamas spokesman Sami Abu Zuhri called the speech “disappointing,” and told Al Jazeera television that Obama offered nothing new. "What Obama needs to do is not to add slogans but to take concrete steps to protect the rights of the Palestinian people and the Arab nation," Abu Zuhri said.
Israeli Prime Minister Benjamin Netanyahu said Obama's vision of a Palestinian state with the 1967 borders could leave the Jewish state "indefensible.”
In a statement, Netanyahu said he expected Washington to allow Israel to keep major settlement blocs beyond the 1967 lines in the occupied West Bank in any peace deal with the Palestinians.
The Israeli leader meets with Obama at the White House on May 20, an event that could prove tense in light of the speech.