The transfer of authority came a day after from combat operations to preparing Iraqi forces to assume responsibility for their own security. Mr. Obama made clear in Tuesday's speech that this was no victory celebration.
A six-month stalemate over forming a new Iraqi government has raised concerns about the country's stability and questions over whether the leadership can cope with a diminished but still dangerous insurgency.
Newly promoted Army Gen. Lloyd Austin also maintained a somber tone as he took the reins of the some 50,000 American troops who remain in Iraq, with a deadline for a full withdrawal by the end of next year.
He noted "hostile enemies" continue to threaten Iraq and pledged that "our national commitment to Iraq will not change."
"Although challenges remain, we will face these challenges together," Austin said during the ceremony at the opulent al-Faw palace of ousted dictator Saddam Hussein.
Austin, who most recently served in Iraq as commander of troop operations from 2008-09, replaces Gen. Ray Odierno, who is heading to Virginia to take over the Joint Forces Command after about five years in Iraq.
"This period in Iraq's history will probably be remembered for sacrifice, resilience and change," Odierno said. "However, I remember it as a time in which the Iraqi people stood up against tyranny, terrorism and extremism, and decided to determine their own destiny as a people and as a democratic state."
Vice President Joe Biden, Defense Secretary Robert Gates, and Joint Chiefs Chairman Adm. Mike Mullen presided over the ceremony, which was held at the main U.S. military headquarters on the southwestern outskirts of Baghdad.
Gates, visiting American troops in the Iraqi city of Ramadi Wednesday, said history will judge whether the fight was worth it for the United States.
"The problem with this war, I think, for many Americans, is that the premise on which we justified going to war turned out not to be valid," he said. "Even if the outcome is a good one from the standpoint of the United States, it'll always be clouded by how it began."
Claiming that Saddam had weapons of mass destruction, then-President George W. Bush ordered the invasion with approval of a Congress still reeling from the 9/11 attacks. Bush's claims were based on faulty intelligence, and the weapons were never found.
Iraqi Foreign Minister Hoshyar Zebari said his country is grateful for what the Americans have done, but it is now time for Iraqis to secure their own future.
"We appreciate the sacrifices the U.S. military and the American people made while standing with us in these very, very difficult times," Zebari told The Associated Press in a phone interview. "The war for Iraq's future is ongoing and it should be fought and won by the Iraqi people and their leaders," Zebari said.
Mr. Obama acknowledged the ambiguous nature of the war in which American forces quickly ousted Saddam but were never able to fully control the Sunni Muslim insurgency against the Shiite-dominated establishment that even now threatens to re-ignite.
Still, he said the time had come to close this divisive chapter in U.S. history.
"We have met our responsibility," Mr. Obama said. "Now it is time to turn the page."
Avoiding any hint of claiming victory in a war he once called a major mistake, the president recognized the sacrifices of America's military. More than 4,400 American troops and an estimated 100,000 Iraqis were killed at a cost of billions of dollars.
Iraqi Prime Minister Nouri al-Maliki, a Shiite, said Tuesday the end of U.S. combat operations was a return to sovereignty for the battered country and he reassured his people that their own security forces could defend them.
Iraqi forces on Wednesday appeared to be on heightened alert, spread out at checkpoints across the city intended to reassure the populace and ward off insurgent attacks.
Just under 50,000 U.S. troops remain in Iraq down from a peak of about 170,000 at the height in 2007. Those forces will not be able to go on combat missions unless requested and accompanied by Iraqi forces.
But drawing a line between what is and is not combat may not be easy. All American forces carry weapons and they still come under attack from insurgents near daily. Earlier this month, for example, Sgt. Brandon E. Maggart, 24, of Kirksville, Mo. was killed near the southern city of Basra on Aug. 22 a few days after the last combat brigade rolled across the border into Kuwait.
Iraq is also far from the stable democracy once depicted by the Bush administration and hoped for by Mr. Obama when he laid out his timeline for withdrawing American troops shortly after he took office in 2009.
Half a year has passed since Iraq's March 7 elections and the country's political leaders have so far failed to form a new government.
While Iraqis are generally happy to see the U.S. military pulling back, they are also apprehensive the withdrawal may be premature as militants hammer local security forces. Iraqis also say they fear their country may still revert to a dictatorship or split along religious and ethnic fault lines.
Full Coverage of Iraq Transition:
Obama Calls Bush, Talks to Troops about Iraq
Biden: Time to Focus on the Economy
McCain: Iraq Milestone No Thanks to Obama
Real Risks for 50,000 U.S. Troops Still in Iraq
A Bittersweet Homecoming for Iraq Troops
Obama on Fallen Soldiers
'Transition in Afghanistan Will Begin'
Obama on Bush Conversation, Patriotism
American Challenges at Home