But the president did not suspend $1.1 billion in military and other aid to Egypt the United States sends each year. And Obama tried to thread the middle ground between the Egyptian military and the country's Islamic extremists, saying Egypt must take steps to solve its own problems.
"The United States strongly condemns the steps taken by Egypt's interim government and military" against protesters, Obama said from his rented vacation home in Chilmark, Mass.
Meanwhile, the offices of the governor of Giza were set on fire Thursday by supporters of ousted Egyptian President Mohamed Morsi, Egyptian media said.
Hundreds of pro-Morsi supporters stormed the building as other protesters blocked a major Cairo road, bringing traffic to a standstill, al-Ahram reported.
Clashes between Egypt's security forces and Morsi-backers have resulted in at least 525 protester deaths and the deaths of 40 security officers in the past few days, officials said.
In Massachusetts, Obama cited the long relationship between the United States and Egypt, which he said was a "cornerstone of peace in the Middle East," and praised the revolution that brought down President Hosni Mubarak two years.
But Obama said the U.S.-Egyptian relationship also was framed by a set of principles, including non-violence and respect for human rights.
"That's why we're so concerned by recent events," Obama said. "We are appreciative [of the fact that the ousted Morsi government] did not respect the views of all Egyptians."
Developments could have led to a further evolution of democracy, but instead there was a crackdown, the president said.
"Let me say that the Egyptian people deserve better than what we've seen in the last few days," Obama said, and called on the military and protesters to step back from violence, "including on churches."
More than 30 Coptic Christian churches have been attacked by Muslim Brotherhood protesters.
"America cannot determine the future of Egypt," Obama said. "That's a task for the Egyptian people. We don't take sides with any political party. ... We want a peaceful, democratic, prosperous Egypt. That's our interest. But to achieve that, Egypt will have to do the work."
Operation Bright Star, a biennial joint U.S.-Egyptian military exercise, had been scheduled for mid-September.