Focusing his State of the Union address squarely on domestic priorities, Mr Obama referred only in passing to churning foreign policy crises, including North Korea's new nuclear test and Iran's unsolved nuclear brinkmanship.
He grasped for a note of optimism after years of frustration at a stop-start economic recovery and praised Americans for steadfastness in rebounding from the financial earthquake rumbling when he took office four years ago.
Read the full text of Barack Obama's speech here
"Together, we have cleared away the rubble of crisis and can say with renewed confidence that the state of our union is stronger," Mr Obama said, in a speech punctuated by raucous cheers in the House of Representatives.
The address was Mr Obama's best chance to speak directly to Americans to sell plans endorsed by voters in November, and to stave off the domestic lame-duck status that eventually constrains all second-term presidents.
Divided Washington must fix its gaping budget deficit, the president said, and described billions of dollars in automatic spending cuts due to crash into the economy on March 1 as "a really bad idea".
"It is our generation's task, then, to reignite the true engine of America's economic growth - a rising, thriving middle class," he said.
"Our first priority is making American a magnet for new jobs and manufacturing.
"After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the last three."
The president proposed raising the minimum wage by more than 20 per cent, as well as investing billions in infrastructure projects in a bid to boost economic growth.
Florida senator Marco Rubio, a rising Republican star who could run for president in 2016, accused Mr Obama of being too fond of big government.
"I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy," Senator Rubio said in the formal Republican response to Mr Obama's speech.
He tried to shame Congress into action on climate change, rebutting head-on the many climate sceptics in the Republican Party by noting that 12 of the world's hottest years on record took place in the past 15 years.
"We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence," Mr Obama said.
"Or we can choose to believe in the overwhelming judgment of science - and act before it's too late."
"If Congress won't act soon to protect future generations, I will.
"I will direct my cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy."
But his speech was notably lacking the soaring claims to world leadership and ambitious foreign policy goals seen at the start of Mr Obama's first term.
Domestically, the president said he wanted a bill to reform the broken immigration system to give illegal immigrants a path to citizenship within months.
And he was at his most passionate when making a case to a tough audience in Congress for measures to stem gun violence, following the killings of 20 kids at a Connecticut elementary school in December.
"If you want to vote no, that's your choice," he said.
"But these proposals deserve a vote.
"Because in the two months since Newtown, more than 1,000 birthdays, graduations and anniversaries have been stolen from our lives by a bullet from a gun."
Looking on in the House gallery with first lady Michelle Obama were the parents of Hadiya Pendleton, a teenager shot in a random shooting not far from the president's Chicago home days after she took part in his inaugural parade.
Breaking new ground, Mr Obama announced the start of formal talks between the US and Europe on a trans-Atlantic trade pact and previewed a new plan to thwart cyber attacks on US infrastructure.
The president announced the return of 34,000 of the 66,000 US troops remaining in Afghanistan by next February, ahead of a full withdrawal in 2014.
"This drawdown will continue. And by the end of next year, our war in Afghanistan will be over," he said.
He said North Korea's nuclear test yesterday would only isolate the Stalinist state further, in neutral language perhaps penned to deprive Pyongyang of the attention it seeks.
The president promised though to stand by America's Asian allies, "strengthen our own missile defence, and lead the world in taking firm action in response to these threats".
Arguing Al Qaeda was a "shadow" of its former self, Mr Obama pledged to help nations like Yemen, Libya and Somalia provide for their own security and help allies like France fighting extremists in Mali.
Despite criticism he has ignored the slaughter of nearly 70,000 people in Syria, Mr Obama vowed to keep up pressure on Bashar al-Assad's regime and said he would stand firm in defence of Israel, which he will visit next month.