"Today, we have taken the final major step toward ending the discriminatory 'don't ask, don't tell' law that undermines our military readiness and violates American principles of fairness and equality," Obama said in a statement. "In accordance with the legislation that I signed into law last December, I have certified and notified Congress that the requirements for repeal have been met."
The policy ends officially in 60 days -- Sept. 20.
The action came as Leon Panetta was sworn in officially as defense secretary.
"I don't think there's any issue with it (ending the policy) whatsoever," Maj. Gen. Jeffrey Buchanan told The Washington Post.
"And if there are individual issues," Buchanan said, "then people will have to either conform or make a decision to leave when they can."
Gay-rights advocates had advised service members not to reveal their sexual identity until the ban was formally repealed.
Since 1993 the "don't ask" policy allowed gays to serve in the military, provided they kept their sexual orientation quiet. More than 17,000 service members have been discharged since it was mandated by Congress.
Gay activists and top military officials caution it may take years for non-heterosexuals to feel completely comfortable revealing their sexual orientation to colleagues, even though troops have undergone training to prepare for open service since February, the Post said.
Kate Middleton recycles dress at movie premiere
Couple mistakenly served bag of cash at McDonald's drive-thru