"One of the world's longest-serving dictators is no more," Obama said as news of Gadhafi's death and apparent images of his body took hold across the globe.
Obama claimed no personal vindication for his approach to U.S. intervention. But he hailed the success of the NATO effort that was intended to protect civilians and eventually helped force Gadhafi from power.
"The dark shadow of tyranny has been lifted," Obama said from the White House Rose Garden. "And with this enormous promise, the Libyan people now have a great responsibility."
The president said it was the Libyan government that confirmed the death, and he embraced the news, saying: "we can definitively say that the Gadhafi regime has come to end."
He urged a smooth transition to what he hoped would be fair, free elections.
Gadhafi was killed Thursday when revolutionary forces overwhelmed his hometown, Sirte.
Prime Minister Mahmoud Jibril announced to his nation that the moment so many had waited for had come.
Gadhafi's death is the latest in a string of foreign policy victories this year for the Obama administration, including the killing of al-Qaida leader Osama bin Laden and the recent strike against a radical U.S.-born cleric in Yemen.
While the U.S. briefly took the lead in the NATO bombing campaign in Libya, America quickly took a secondary role to its allies. Obama said the joint international effort showed what can be achieved by collective action.
"Without putting a single U.S. service member on the ground, we achieved our objectives and our NATO mission will soon come to an end," he said.
The president was unsparing in his description of Gadhafi. He said the Libyan "ruled the people with an iron fist, basic human rights were denied, innocent civilians were detained, beaten and killed. Terror was used as a political weapon."
Yet he cautioned of difficult days ahead in Libya, where enormous challenges of governance and stability remain.
"But the United States, together with the international community, is committed to the Libyan people," he said. "Today's events prove once more that the rule of an iron fist inevitably comes to an end."
Separately, Vice President Joe Biden and Secretary of State Hillary Rodham Clinton offered measured optimism about Libya's future.
Like Obama, Biden applauded the U.S. decision to seek broad international backing for the Libya mission.
"In this case, America spent $2 billion total and didn't lose a single life. This is more of the prescription for how to deal with the world as we go forward than it has been in the past," Biden said during a speech in Plymouth, N.H.
Sen. John McCain, R-Ariz., hailed Gadhafi's death as "an end to the first phase of the Libyan revolution." The U.S. and Europe "must now deepen our support of the Libyan people," McCain, the top Republican on the Armed Services Committee, said in a statement.
Senate Republican leader Mitch McConnell said the United States and Europe would help Libya put together a representative government.
"A number of the people who led the Transitional National Council were educated in the United States, and we're obviously hopeful that they will want to have a representative government and that they will be an ally of the United States," he said.
Senate Foreign Relations Committee Chairman John Kerry, D-Mass., praised the Obama administration's involvement in Libya, saying the U.S. "demonstrated clear-eyed leadership, patience and foresight by pushing the international community into action."
Even before Gadhafi's death, the U.S. moved swiftly to assist Libya's National Transitional Council, providing the rebel-led group with financial assistance.
In July, the U.S., along with allies in Europe and the Middle East, recognized the NTC as Libya's official government. And last month, the U.S. ambassador to Libya returned to Tripoli to lead a newly reopened American Embassy in a post-Gadhafi era.
Reports from Libya said Gadhafi had been holed up with the last of his fighters in a furious battle with revolutionary forces assaulting the few buildings his supporters still held in his Mediterranean coastal hometown of Sirte. At one point, a convoy tried to flee the area and was blasted by NATO airstrikes, though it was not clear if Gadhafi was in one of the vehicles.
Associated Press writers Ben Feller and Donna Cassata contributed to this report.