Obama and Russian President Dmitry Medvedev will sign the agreement April 8 in Prague, where Obama gave a major speech on doing away with nuclear arms one year ago.
If ratified by the Senate and by Russia's legislature, the reductions still would leave both countries, by far the world's largest nuclear powers, with immense arsenals - and the ability to easily annihilate each other. Together, the United States and Russia possess about 95 percent of the world's nuclear weapons, according to the Center for Arms Control and Non-Proliferation.
Still, Obama called the pact a step toward "the peace and security of a world without nuclear weapons."
Agreed Russian Foreign Minister Sergey Lavrov, "Both parties see the ultimate goal in building a nuclear-free world."
No one sees that any time soon. But U.S. leaders noted that the agreement came shortly before Obama was to host an international conference on nuclear proliferation in Washington.
U.N. Secretary-General Ban Ki-moon called the treaty an "important milestone" and said he believed it would "add a significant impetus" to a U.N. conference in May to review the Nuclear Nonproliferation Treaty.
"We have turned words into action," Obama said at the White House after completing the agreement in a morning phone call with Medvedev. The United States hopes the agreement will lead to better cooperation on other issues, such as a unified U.S.-Russian stance against the development of nuclear weapons by Iran.
Ratification in the Senate will require 67 votes, two-thirds of the senators, meaning Obama will need support from Republicans, something he's found hard to come by on other issues.
Sen. Richard Lugar of Indiana, a leading Republican on the Senate Foreign Relations Committee, welcomed Friday's announcement. Lugar, who is influential among fellow GOP senators as an arms control expert, said he looked forward to receiving the treaty so that the committee could hold hearings and "work quickly to achieve ratification."
Under the agreement, which would replace and expand on a landmark 1991 Strategic Arms Reduction Treaty that expired in December, the two former Cold War foes would cut their arsenals of nuclear warheads to 1,550 - from the 2,200 previously permitted - over seven years. It would also trim the number of allowable missiles and bombers capable of carrying the warheads to targets.
"With this agreement, the United States and Russia - the two largest nuclear powers in the world - also send a clear signal that we intend to lead," Obama said.
In Moscow, the Kremlin hailed the agreement. Medvedev's spokeswoman, Natalya Timakova, said, "This treaty reflects the balance of interests of both nations."
There are still disagreements.
According to U.S. officials, the accord won't restrict moving ahead on deployment of an American missile defense system - long a touchy subject between the two nations. And Russian Foreign Minister Lavrov suggested Russia reserves the right to walk away from the treaty if it sees it can no longer protect its security because of a U.S. missile-defense buildup.
"The existence of strategic defensive systems capable of neutralizing strategic offensive weapons will be taken into account," Lavrov told reporters.
Sealing the deal gave Obama a badly needed foreign policy victory. His advisers hoped it would help lend momentum to his overall agenda by demonstrating strength on both the international and domestic fronts. It came soon after Congress approved his top domestic priority, the health care overhaul.
Yet, given the highly charged partisan atmosphere in Washington, Republican support for the treaty is not a foregone conclusion. Obama will need at least eight Republican votes in the Senate.
And despite supportive statements by more moderate Republicans such as Lugar, some conservative GOP senators have voiced concerns that too many concessions to Moscow could limit the flexibility of future presidents.
Secretary of State Hillary Rodham Clinton, standing with Defense Secretary Robert Gates alongside Obama, said, "National security has always produced large bipartisan majorities, and I see no reason why this should be any different. I believe that a vast majority of the Senate, at the end of the day, will see that this is in America's interest."
Clinton also jestingly offered the Russian government help in getting the treaty through the Duma. "President Obama has said he will send Rahm Emanuel to Moscow" if necessary, she joked, referring to Obama's blunt-speaking chief of staff. "We all endorsed that offer."
Because the earlier START treaty expired in December, Russia and the United States will not have an agreement for inspecting each other's arsenals until a replacement treaty comes into effect.
Clinton emphasized the verification mechanism in the treaty - a key demand of the U.S. that was resisted by Russia and was one of the sticking points that delayed completion of the deal. It will "reduce the chance for misunderstandings and miscalculations," she told reporters.
She noted that the U.S. and Russia still possess the lion's share of the world's nuclear weapons. "We do not need such large arsenals to protect our nation," she said.
Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said U.S. commanders around the world "stand solidly behind the treaty."
Gates cautioned that the treaty - and an accompanying review of nuclear posture - will require more spending to modernize America's nuclear arsenal. At the same time, the defense secretary called it an "important milestone" in consigning Cold War nightmares to the past.
Gates recalled serving as an Air Force officer in the 1960s at Whiteman Air Force Base, Mo., then home to 150 Minuteman nuclear missiles. The new treaty, he said, "is testimony to just how much the world has changed."
The agreement was hailed internationally.
In Brussels, European Union Commission President Jose Manuel Barroso said the EU strongly supports nonproliferation efforts and "there could not be a more positive signal to our efforts than the news today."