Weeks after former US contractor Edward Snowden revealed details of widespread US surveillance, Obama stood firm in denying any abuse by the program but acknowledged that he needed to address growing concerns.
"All these steps are designed to ensure that the American people can trust that our efforts are this line with our interests and our values," Obama told a news conference.
"And to others around the world I want to make clear once again that America is not interested in spying on ordinary people," he said.
Obama said he would ask Congress to reform one of the most controversial sections of the Patriot Act passed in the aftermath of the September 11, 2001 attacks -- Section 215, which gives the government access to telephone and other records of its citizens.
He also called for the start of debate in the courts that authorise surveillance, which now only hear requests from the government without hearing counter-arguments as is customary in other parts of the US judiciary.
"While I`ve got confidence in the court and I think they`ve done a fine job, I think we can provide greater assurances that the court is looking at these issues from both perspectives," Obama said.
Obama said that the administration would declassify documents on surveillance and also appoint a body of outside experts to help ensure a balance between security and privacy.
Controversy has grown in the United States since Edward Snowden, a former government contractor who fled to Russia, revealed details of some of the more sweeping aspects of US surveillance on citizens` Internet searches and telephone records.
Obama, who cancelled a summit with Russian President Vladimir Putin over Russia`s decision to grant asylum to Snowden, insisted that he has always tried to prevent abuse of surveillance programs.
"I don`t think Snowden was a patriot," Obama said.
Obama said of the Patriot Act: "But given the scale of this program, I understand the concerns of those who would worry that it could be subject to abuse."
On July 25 the House of Representatives rejected a bid to cut funding for some National Security Agency programs by a surprisingly narrow 205-217 vote, with both conservative Republicans and liberal members of Obama`s Democratic Party voicing concern about citizens` privacy.
A spokesman for Speaker John Boehner, the top Republican in Congress, was non-committal toward Obama`s call for congressional action to reform surveillance programs.
"Much of any public concern about this critical program can be attributed to the president`s reluctance to sufficiently explain and defend it," Boehner`s spokesman Brendan Buck said.
"Transparency is important, but we expect the White House to insist that no reform will compromise the operational integrity of the program," he said.
"They will provide an interim report in 60 days and a final report by the end of this year, so that we can move forward with a better understanding of how these programmes impact our security, our privacy and our foreign policy. So all these steps are designed to ensure that the American people can trust that our efforts are in line with our interests and our values," Obama said.
"To others around the world, I want to make clear once again that America is not interested in spying on ordinary people. Our intelligence is focused above all on finding the information that`s necessary to protect our people and, in many cases, protect our allies," said the US President.
"It`s true we have significant capabilities. What`s also true is we show a restraint that many governments around the world don`t even think to do, refuse to show. That includes, by the way, some of America`s most vocal critics," he said.
"We shouldn`t forget the difference between the ability of our government to collect information online, under strict guidelines and for narrow purposes, and the willingness of some other governments to throw their own citizens in prison for what they say online," Obama said.