Obama in a signing statement said that he was doing so to ensure that the US will continue to have the "strongest military in the world".
The President, who is holidaying in Hawaii, said he was clearing the bill even as he has strong reservations on several provisions of National Defence Authorisation Act 2013.
The White House had earlier threatened to veto the bill.
The bill provides Department of Defence with a spending threshold of USD 633 billion for 2013, including USD 527.4 billion for the Pentagon budget and a USD 88.5 billion for overseas contingency operations including funding the war in Afghanistan.
The bill also authorises USD 9.8 billion for missile defence.
In his statement Obama said, "Our Constitution does not afford the President the opportunity to approve or reject statutory sections one by one. I am empowered either to sign the bill, or reject it, as a whole.”
"In this case, though I continue to oppose certain sections of the Act, the need to renew critical defence authorities and funding was too great to ignore," Obama explained.
In a time when all public servants recognise the need to eliminate wasteful or duplicative spending, various sections in the Act limit the Defence Department's ability to direct scarce resources towards the highest priorities for our national security, he said.
For example, restrictions on the Defence Department's ability to retire unneeded ships and aircraft will divert scarce resources needed for readiness and result in future unfunded liabilities.
Additionally, the Department has endeavoured to constrain manpower costs by recommending prudent cost sharing reforms in its health care programs.
By failing to allow some of these cost savings measures, the Congress may force reductions in the overall size of the military forces, he said.
Obama said several provisions in the bill also raise constitutional concerns.
For instance one section places limits on the military's authority to transfer third country nationals currently held at the detention facility in Parwan, Afghanistan.
Washington: US President Barack Obama has signed into law a whopping USD 633 billion defence bill that authorises spending on the war in Afghanistan and enhanced security for American missions worldwide.
First Published: Thursday, January 03, 2013, 13:11