"I believe that President Mubarak cares about his country. He is proud, but he's also a patriot," Obama said as Cairo remained a center of protest and upheaval.
The U.S. president said he had urged Mubarak to listen to those in his government and the pleading voices of his people, and decide if he's willing to accept a serious transition out of power.
Obama, limited in his leverage to control events, appeared to adjust his tactics in making brief comments to reporters. Instead of just outlining Egyptian steps to halt the street violence and move toward a freer government, Obama openly played to Mubarak's pride and reputation.
Mubarak, facing an uprising in his country after nearly 30 years of rule, has said he will not run for re-election in September. Obama called that a "psychological break" for Mubarak and then challenged him to reflect on his next move. He did that with a reminder that world is watching.
"The key question he should be asking himself is, 'How do I leave a legacy behind in which Egypt is able to get through this transformative period?'" Obama said. "And my hope is - is that he will end up making the right decision."
The comments came in response to a reporter's question about Egypt, the first one Obama had agreed to answer since the crisis began 11 days earlier. In a brief appearance with Canadian Prime Minister Stephen Harper, Obama declined to answer whether a credible transition toward free, fair elections in September could begin while Mubarak remained in power.
Protesters are adamant that Mubarak must go now; they have campaigned for days, at times met with violence in images seen around the world.
The latest rally in Cairo on Friday drew roughly 100,000 protesters, and it went off largely peacefully to the enormous relief of U.S. officials.
The Obama administration has been talking with top Egyptian officials on the formation of a military-backed caretaker government that could prepare the country for new elections, potentially with the 82-year-old Mubarak stepping down and newly appointed Vice President Omar Suleiman in charge for the interim. Suleiman has offered negotiations with all political forces, including the banned fundamentalist Islamic Brotherhood, over constitutional changes needed to ensure a free vote.
On that front, Obama said only: "My understanding is that some discussions have begun."
U.S. officials have been deeply skeptical about Mubarak's commitment to transition talks.
The U.S. president also said in his broadest terms yet that Egypt, no matter what, will be a changed country based on the demonstrated will of its people.
"Going back to the old ways is not going to work," Obama said. "Suppression's not going to work. Engaging in violence is not going to work. Attempting to shut down information is not going to work."
Harper showed solidarity.
"I don't think there is any doubt from anyone who is watching this situation that transition is occurring and will occur in Egypt," the Canadian leader said. "The question is what kind of transition this will be and how it will lead. It is ultimately up to the Egyptian people to decide who will govern them."
With each day of unrest passing and little visible progress, the White House has been under deeper pressure to prod a better outcome. But Obama has tried in every public statement to balance his interests, underscoring Egypt's friendship and strategic importance to the United States and declaring anew that "it is not us who will determine that future" for Egypt.
Obama also said the United States has sent a strong, clear message that attacks on journalists, human rights activists and peaceful protesters are unacceptable. He did not directly blame Mubarak but said the Egyptian government is responsible for protecting its people.
The chairman of the Joint Chiefs of Staff said Friday the U.S. hasn't raised its military readiness or alert status. Adm. Mike Mullen also said there shouldn't be any rush to terminate military assistance to Egypt.
On Capitol Hill, Rep. Gary Ackerman, a New York Democrat and member of the Foreign Affairs Committee, urged Obama to suspend aid to Egypt until a transition from Mubarak begins. "I believe it essential to our national security interests that the world's largest Arab state know that America's commitment to democracy is real, and that we will not continue to underwrite a regime organizing violence against its own people," Ackerman said.
Associated Press writers Matthew Lee, Donna Cassata and Tom Raum contributed to this story.