Obama outlined six key areas that he said were the sources of tension between the United States and the Muslim world: combating violent extremism, the Israeli-Palestinian conflict, nuclear proliferation in Iran, and the lack of democracy, religious freedom and women's rights in the region.
The president reiterated the message he conveyed in Ankara, Turkey, in April: "America is not -- and never will be -- at war with Islam.
"We will, however, relentlessly confront violent extremists who pose a grave threat to our security. Because we reject the same thing that people of all faiths reject: the killing of innocent men, women and children. And it is my first duty as president to protect the American people," he said.
Following his speech, the president visited the pyramids in Giza with his staff. Obama took a joking jab at himself when looking at a hieroglyphic of a man with big ears. The president was heard saying, "That looks like me! Look at those ears!"
President Obama's words drew responses from around the world, although official statements remained mostly muted.
Saeb Erekat, an adviser to President Mahmoud Abbas said, "I believe that as Palestinians we warmly welcome President Obama's declaration of Palestine, the two-states solution, agreement signed, the road map, the call to stop settlement activities including natural growth and for Israel to stop being a occupy power."
The government of Israel responded in a written statement , saying, "We share President Obama's hope that the American effort heralds the opening of a new era that will bring an end to the conflict, and to general Arab recognition of Israel as the nation of the Jewish people that lives in security and peace in the Middle East."
Nakhle al Hage, news director at Al Arabiya TV network, told ABC News that Obama's speech did not contain anything new.
"It was very much anticipated that Obama would announce his plans to make peace. That was missing," al Hage told ABC News.
But he said that people in the Arab world were flattered that Obama "recognizes our values."
"People were listening carefully," he said, but "there is a big doubt in the Arab world that Obama will not be able to pressure Israel enough to make the tough decisions."
Some Israelis and Palestinians were wary of Obama's words about the conflict in their region.
"This speech is not of favor of Gaza or the Palestinian people," said Muhamad Khuder, a Gaza resident. "Obama is saying that the Palestinian people and the Hamas government must recognize Israel. How can I recognise Israel and my house is demolished?"
"I think that as a result of Obama it will be more difficult," said Aliza Herbst, a settler in the West Bank. "As far as us personally in settlements, I believe that Obama has overreached himself, I don't believe that he can enforce what he would like to enforce."
Iraqis also had a mixed response to Obama's speech, in which he said the United States "will support a secure and united Iraq as a partner, and never as a patron."
"I do not think his speech will end the American Arab conflict," said Hamid, a resident in Karradah, Iraq. "I do not think he is serious about pulling out soldiers by 2012."
In Kabul, ABC News met a group of young men who seemed impressed by the president's words.