The president also said the measure had been announced in "the absence of any immigration action" from Congress and urged the passage of the Dream Act, a bill that aimed to establish a path towards US citizenship for young people who were brought to the US as minors.
"They are American in their hearts, in their minds, in every way but one: on paper," Mr Obama said.
He said the measure would improve the US economy, benefit its national security and was simply "the right thing to do. Period".
In an unusual turn of events, Mr Obama was interrupted by a questioner from the media during his announcement, an intervention which left the president visibly surprised.
Earlier on Friday <link> <caption>Secretary of Homeland Security Janet Napolitano said</caption> <url href="http://www.dhs.gov/ynews/releases/20120612-napolitano-announces-deferred-action-process-for-young-people.shtm" platform="highweb"/> </link> deportation laws were not designed to be "blindly enforced without consideration given to the individual circumstances of each case".
"Discretion, which is used in so many other areas, is especially justified here," she added.
The policy change does not provide a path to permanent lawful status, or a path to citizenship, Ms Napolitano said, adding that it is not immunity or amnesty.
But, she added, many "productive young people" who would be eligible under the changes posed no threat to national security or public safety.