The announcement was made in a letter from Attorney General Eric Holder to congressional leaders in relation to two lawsuits, Pedersen v. OPM and Windsor v. United States, which challenge a section of DOMA that defines marriage for federal purposes as only between one man and one woman.
Obama "has made the determination," Holder wrote, that Section 3 "as applied to same-sex couples who are legally married under state law, violates the equal protection component of the Fifth Amendment."
Holder wrote that the president has instructed government lawyers to no longer defend the law in those two lawsuits.
However, administration officials pledged to continue to enforce the law, which remains in effect unless Congress repeals it or a court strikes it down.
The highly unusual, though not unprecedented, decision not to defend a federal law amounts to a major change of course for the administration which has previously said it was obligated to do so even if it disagreed with it.
Legal experts said the move would likely influence judges currently weighing federal lawsuits against DOMA and a handful of challenges to same-sex marriage bans at the state level.
"It's certainly going to be persuasive in federal courts that even the government, who had a responsibility to defend the statutes if it could find a basis for doing so, felt that a 'heightened scrutiny' does apply," said former George W. Bush solicitor general Ted Olson, who is leading the legal challenge against California's Proposition 8, which bans same-sex marriages in that state.
Judges have largely employed a loose legal standard, known as "rational basis," that requires only a reasonable relationship between a law's purpose and its effect to determine whether a gay marriage ban is constitutional.
But the Obama administration reasoned in its decision that a tougher standard ought to be imposed on arguments against unions between same-sex couples.
"The government has decided that prevailing social views of morality are no longer sufficient to justify discrimination against homosexuals," said American University constitutional law professor Stephen Vladeck.
"The administration has decided to abide by a higher standard then courts have thus far required," he said. "The heightened scrutiny standard is traditionally reserved for discrimination on the basis of sex, race, religion and other areas where minority groups should receive special consideration."
The news that Obama would drop his defense of the Defense of Marriage Act was hailed by gay rights activists.
"This is a monumental decision," said Joe Solmonese, president of the Human Rights Campaign, a gay rights group. "Congressional leaders must not waste another taxpayer dollar defending this patently unconstitutional law. The federal government has no business picking and choosing which legal marriages they want to recognize."
Republicans and opponents of same-sex marriage sharply criticized the administration's decision as an undue distraction from focus on the economy and an extraordinary break from precedent.