The outgoing president made the comments during an emotional farewell at the Armed Forces Full Honour Farewell Ceremony.
Obama thanked military personnel for their sacrifice and said there had been “no greater privilege and no greater honour than serving as the commander in chief of the greatest military in the history of the world”.
“You’ve shown that when it comes to fighting terrorism, we can be strong and we can be smart,” Obama said.
“Not by letting our forces get dragged in to sectarian conflicts and civil wars but with smart, sustainable, principled partnerships.”
During the address at Joint Base Myer-Henderson Hall, where the 55-year-old was given his final salute before leaving office, Obama described his eight-year presidency as a “privilege of a lifetime”.
“I have learned from you so much, I am a better man having worked for you.
“I am confident our armed forces will remain the greatest force for freedom and security that the world have ever known”.
bama also called for a smooth handover of control of the U.S military to the next commander in chief Donald Trump.
The billionaire businessman will be inaugurated as the 45th president of the United States at a large ceremony in Washington on 20 January.
“We’ve got to make sure that during this transition period that there is a seamless passing of the baton, that there’s continuity,” Obama said.
The outgoing president alluded to the importance of ensuring “we are doing everything we can to make sure that the next president will benefit from the same kinds of outstanding advice and service that these people around the table have provided me.”
His comments came as questions are raised over how Donald Trump may handle national security challenges.
Since his shock win, the 70-year-old has done little to douse fears over nuclear security, after posting on Twitter: “The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes.”
He later backed up the radical statement in a TV interview, when he declared: “Let it be an arms race.”
He is the first president-elect to have never held office.