The U.S. military played a role in a U.N.-sanctioned intervention in Libya meant to protect civilians from attacks by forces loyal to leader Moammar Gadhafi. Gadhafi died in October 2011 after falling into rebel hands, ushering in a new government for the first time in a generation.
Obama said his government is working to erase sanctions imposed on Libya and work more closely with the democratic government in Tripoli.
"The situation in Libya, however, continues to pose an unusual and extraordinary threat to the national security and foreign policy of the United States and we need to protect against this threat and the diversion of assets or other abuse by certain members of Gadhafi's family and other former regime officials," he said in a statement.
Former regime officials are on trial for war crimes. Insurgents from Libya have crossed into Mali and Algeria and launched terrorist attacks.
Obama declared a national emergency to deal with the Libyan threat in February 2011. His latest assessment extends the measure for another year.
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