1.54pm AEDT
In closing his final speech, Mr Obama asked one final favour of the American people.
"I am asking you to believe not in my ability to bring about change but in yours," he said.
"I am asking you to hold fast to that faith written into our founding documents, that ideal whisper by slaves and abolitionists, that spirit sung by immigrants, and those who march for justice, that creed from those who planted flags from foreign battlefields to the surface of the moon, a creed at the core of every American whose story is not yet written: Yes, we can. Yes we did. Yes we can."
Mr Obama was then joined on stage by his wife Michelle and his daughter Malia. His other daughter Sacha did not appear to be present.
1.52pm AEDT
Mr Obama said he was still optimistic because "our work has not only helped so many Americans, it has inspired so many Americans, especially so many young people out there".
"This generation coming up - unselfish, altruistic, creative, patriotic - I've seen you in every corner of the country, you believe in a fair and just and inclusive America," he said.
"You know that constant change has been America's hallmark, that it's not something to fear, but something to embrace. You are willing to carry this hard work of democracy forward.
"You will soon outnumber all of us, and I believe as a result the future is in good hands."
He said it had been "the honour of my life" to serve America.
"I will be right there with you as a citizen for all my remaining days."
1.49pm AEDT
Mr Obama also paid tribute to his Vice President Joe Biden.
"You were the first decision I made as a nominee and it was the best. , not just because you have been a great Vice President, but because in the bargain I gained a brother, and we love you and Jill like family, and your friendship has been one of the great joys of our lives," he said.
He credited his staff with giving him energy.
"Every day I try to reflect back what you display - heart and character and idealism," he said.
"Even when times got tough and frustrating, you never let Washington get the better of you.
"You guarded against cynicism, and the only thing that makes me prouder than all the good that we've done is the thought of all the amazing things that you are going to achieve from here.
"And all of you out there, every organisers who moved to an unfamiliar town, every kind family who welcomed them in, every volunteer who knocked on doors, every young person who cast a ballot for the first time, every American who lived and breathed the hard work of change, you are the best supporters and organisers anybody could ever hope for, and I will be forever grateful because you did change the world."
1.45pm AEDT
Mr Obama said his faith in people had been rewarded over these past eight years.
"Some of you here tonight, or watching at home, you were there with us in 2004 and 2008, 2012, maybe you still can't believe we pulled this whole thing off," he said.
"Let me tell you, you are not the only ones."
He then paid tribute to his wife Michelle Obama.
"For the past 25 years, you have not only been my wife and mother of my children, you have been my best friend," he said.
"You took on a role you didn't ask for and you made it your own, with grace and with grit and with style and good humour.
"You made the White House a place that belongs to everybody. And a new generation sets its sights higher because it has you as a role model.
"So you have made me proud and you have made the country proud."
Mr Obama also spoke directly to his daughters.
"Malia and Sasha, under the strangest of circumstances, you have become two amazing young women, you are smart and you are beautiful, but more importantly you are kind and you are thoughtful and you are full of passion," he said.
"And you bore the burden of years in the spotlight so easily. Of all that I have done in my life, I am most proud to be your dad."
1.41pm AEDT
Mr Obama linked all Americans together in sharing the "most important office in a democracy - citizen".
"That's what our democracy demands. It needs you," he said.
"Not just when there is an election, not just when your own narrow interest is at stake, but over the full span of a lifetime.
"If you're tired of arguing with strangers on the internet try talking with one of them in real life.
"If something needs fixing, then lace up your shoes and do some organising.
"If you're disappointed by your elected officials, grab a clipboard, get some signatures and run for office yourself."
He said "presuming a reservoir of goodness in other people" could be a risk, but "for those of us fortunate enough to have been part of this world and to see it up close, let me tell you, it can energise and inspire, and more often than not, your faith in America and in Americans will be confirmed".
"Over the course of these 8 years, I've seen the hopeful faces of young graduates and our newest military officers, I have mourned with grieving families searching for answers and found grace in Charleston Church.
"I've seen our scientist help a paralysed man regain his sense of touch, I've seen wounded warriors who at points were given up for dead, walk again.
"I've seen the youngest of children remind us, through their actions and through their generosity, of our obligations to care for refugees or work for peace. And above all, to look out for each other."
1.39pm AEDT
Mr Obama said it was up to the American people to give the "gift" of the Constitution power.
"We, the people, give it meaning, with our participation and with the choices that we make, and the alliances that we forge, whether or not we stand up for our freedoms, whether or not we respect and enforce the rule of law," he said.
"That's up to us. America is no fragile thing, but the gains of our long journey to freedom are not assured.
"America, we weaken those ties when we allow our political dialogue to become so corrosive that people of good character aren't even willing to enter public service.
"So coarse with rancour, that Americans with whom we disagree are seen not as misguided but as malevolent.
"We weaken those ties when we define some of us as more American than others, when we write off the whole system as inevitably corrupt, and when we sit back and blame the leaders we elect without examining our own role in electing them."
1.35pm AEDT
Mr Obama encouraged Americans to be "vigilant but not afraid".
"ISIL will try to kill innocent people," he said.
"But they cannot defeat America unless we betray our Constitution and our principles in the fight.
"Rivals like Russia or China cannot match our influence around the world, unless we give up what we stand for and turn ourselves into just another big country that bullies smaller neighbours."
He called on all Americans to throw themselves "into the task of rebuilding our democratic institutions".
"When voting rates in America are some of the lowest among advanced democracies, we should be making it easier, not harder, to vote," he said.
"When trust in our institutions is low, we should reduce the corrosive influence of money in our politics and insist on the principles of transparency and ethics and public service.
"When Congress is dysfunctional, we should draw our Congressional districts to encourage politicians to cater to commonsense and not rigid extremes.
"All of this depends on our participation, on each of us accepting the responsibility of citizenship, regardless of which way the pendulum of power happens to be swinging."
1.31pm AEDT
Mr Obama then turned to the destructive consequences of a fracturing world order "by violent fanatics to claim to speak for Islam, more recently by autocrats in foreign capitals who see free markets and open democracies and civil society itself as a threat to their power".
"The peril each poses to our democracy is more far-reaching than a car bomb or a missile," he said.
"They represent the fear of change, the fear of people who look or speak or pray differently, a contempt for the rule of law that holds leaders accountable, an intolerance of dissent and free thought, a belief that the sword or the gun or the bomb or the propaganda machine is the ultimate Arbiter of what's true and what's right."
He spoke about the "extraordinary courage of our men and women in uniform" and the work of intelligence officers, law enforcement and diplomats" who had ensured "no foreign terrorist organisation has successfully planned and executed an attack on our homeland these past eight years".
"And although Boston and Orlando and San Bernardino and Fort Hood remind us of how dangerous radicalisation can be, our law enforcement agencies are more effective and vigilant than ever," he said.
"We have taken out tens of thousands of terrorists, including Bin Laden."
Mr Obama said it was important not to give in to fear mongering.
"We, as citizens, must remain vigilant against external aggression, we must guard against a weakening of the values that make us who we are," he said.
"That's why I reject discrimination against Muslim Americans who are just as patriotic as we are.
"That's why we cannot withdraw from big global fights to expand democracy and human rights and women's rights and LGBTI rights.
"No matter how imperfect our efforts, no matter how expedient ignoring such values may seem, that's part of defending America."
1.29pm AEDT
In speaking about climate change Mr Obama slammed climate deniers.
"Without bolder action, our children won't have time to debate the existence of climate change," he said.
"They will be busy dealing with its effects. More environmental disasters, more economic disruptions, waves of climate refugees seeking sanctuary.
And we can and should argue about the best approach to solve the problem. But to simply deny the problem, not only betrays future generations, it betrays the essential spirit of this country, the essential spirit of innovation and practical problem-solving that guided our founders."
1.26pm AEDT
Mr Obama spoke about the need for people to expand their horizons in a world where social media and fake news increasingly shows people only what they want to know.
"In the rise of naked partisanship and increasing economic and regional stratification, the spinning room of our media into a channel for every taste - all this makes this great sorting seem natural, even inevitable, and increasingly, we become so secure in our bubbles that we start accepting only information, whether it's true or not, that fits our opinions, instead of basing our opinions on the evidence that is out there.
"Politics is a battle of ideas. That's how our democracy was designed.
"But without some common baseline of facts, without a willingness to admit new information and concede that your opponent might be making a fair point, and that science and reason matter, then we're going to keep talking past each other and we'll make common ground and compromise impossible."
He said the "dishonest" and "selective sorting of the facts" that takes place among politicians as part of the reason people find politics dispiriting.
1.23pm AEDT
Mr Obama quoted Harper’s Lee’s famous character from To Kill A Mockingbird in dictating his ideal world view.
“Social attitudes often times take generations to changes, but if our democracy is to work the way it should in this increasingly diverse nation, then each one of us need to try to heed the advice of a great character in American fiction, Atticuss Finch who said,'You never really understand a person until you consider things from his point of view, until you climb into his skin and walk around in it'," he said.
"For white Americans it means acknowledging that the effects of slavery and Jim Crowe didn't suddenly vanish in the '60s, that when minority groups voice discontent, they're not just engaging in reverse racism of practising political correctness.
"When they wage peaceful protests, they are not demanding special treatment, but the equal treatment that our founders promised.
"For native-born Americans, it means reminding ourselves that the stereotypes about immigrants today were said almost word for word about the Irish and Italians, and Poles, who it was said were going to destroy the fundamental character of America, and as it turned out America wasn't weakened by the presence of these newcomers.
"These newcomers embraced this nation's creed and this nation was strengthened.
"Regardless of the station that we occupy, we all have to try harder.
"We all have to start with the premise that each of our fellow citizens loves this country just as much as we do, that they value hard work and family, just like we do, that their children are just as curious and hopeful and worthy of love as our own."
1.20pm AEDT
Mr Obama the social safety net and tax code needed to be reformed so “corporations and individuals who reap the most from this new economy don't avoid their obligations to the country that has made their very success possible".
"We can argue about how to best achieve these goals, but we can't be complacent about the goals themselves," he said.
"For if we don't create opportunity for all people, the disaffection and division that has stalled our progress will only sharpen in years to come."
He said it was important to support the children of immigrants and not discriminate based on people's backgrounds.
"If we're unwilling to invest in the children of immigrants just because they don't look like us, we will diminish the prospects of our own children because those brown kids will represent a larger and larger share of America's workforce," he said.
"If we're going to be serious about race going forward, we need to uphold laws against discrimination in hiring and in housing and in education and in the criminal justice system.
"That is what our Constitution and our highest ideals require."
1.17pm AEDT
Mr Obama said it was important for everyone to have economic opportunity.
"The good news is that today the economy is growing again," he said.
"Wages, incomes, home values and retirement accounts are all rising again. Poverty is falling again.
"The wealthy are paying a fairer share of taxes, even as the stock market shatters records. The unemployment rate is now a 10-year low. The uninsured rate has never ever been lower.
"Health care costs are rising at the slowest rate in 50 years, and I've said, and I mean it, if anyone can put together a plan that is demonstrably better than the improvements that we've made to our health care system, that covers as many people at less cost, I will publicly support it."
But he said more needed to be done to improve economic equality.
"While the top 1 per cent has a massed a bigger share of wealth than income, too many of our families, in inner cities and in rural counties, have been left behind," he said.
"There are now quick fixes to this long terms trend."
1.15pm AEDT
Mr Obama the spoke about the need for the “peaceful transfer of power from one freely elected president to the next”, shouting down boos from the crowd.
“I committed to President-elect Trump that my administration would ensure the smoothest possible transition, just as President Bush did for me,” he said.
“Because it's up to all of us to make sure our government can help us meet the many challenges we still face.
“But thatpotential will only be realised if our democracy works. Only if our politics better reflects the decency of our people.
“Only if all of us, regardless of party affiliation or particular interests, have restored the sense of common purpose that we so badly need right now.
“Understand, democracy does not require uniformity.”
"Our founders argued, they quarrelled, eventually they compromised, they expected us to do the same, but they knew that democracy does require a basic sense of solidarity.
"The idea that for all our outward differences we're all in this together, that we rise or fall as one."
1.12pm AEDT
Mr Obama spoke of America’s ability to change and adapt to make a better country and a better society.
“The work of democracy has always been hard, it has always been contentious,” he said.
“Sometimes it has been bloody. For every two steps forward, it often feels we take one step back. But the long sweep of America has been defined by forward motion, a constant widening of our founding creed to embrace all, and not just some.”
He then spoke of some of the high points in his presidency amid cheers from the crowd.
“If I had told you eight years ago that America would reverse a great recession, reboot our auto industry, and unleash the longest stretch of job creation in our history,” he said.
“If I had told you that we would open up a new chapter with the Cuban people, shut down Iran's nuclear weapons program without firing a shot, take out the mastermind of 9/11.
“If I had told you that we would win marriage equality and secure the right to health insurance for another 20 million of our fellow citizens.
“If I had told you all that, you might have said our sights were set a little too high. But that's what we did.
“That's what you did. You were the change.
“The to answer people's hopes and because of you, by almost every measure, America is a better, stronger place than it was when we started.”
1.09pm AEDT
Mr Obama spoke about the formative role his time in Chigcago had played in his political career.
“I first came to Chicago when I was in my early 20s. And I was still trying to figure out who I was, still searching for a purpose in my life, and it was the neighbourhood not far from here where I began working with church groups in the shadows of closed steel mills. It was on these streets where I witnessed the power of faith and the quiet dignity of working people in the face of struggle, and loss,” he said.
“This is where I learned that change only happens when ordinary people get involved and they get engaged, and they come together to demand it. After eight years as your President, I still believe that.
“And it's not just my belief. It's the beating heart of our American idea, our bold experiment in self-government.”
He spoke about the ideal of the American dream and how the country's founders have encouraged American citizens to strive to achieve their best and the best for others.
"For 240 years, our nation's call to citizenship has given work and purpose to each new generation. It's what led patriots to choose Republic over tyranny, pioneers to trek west, slaves to brave that makeshift railroad to freedom," he said.
"It's what pulled immigrants and refugees across oceans and the Rio Grand. It is what pushed women to reach for the ballot."
1.05pm AEDT
US President Barack Obama walked on to the stage at Chicago's McCormick Place to rapturous applause and cheers from thousands of supporters and party faithful who had gathered to watch him deliver his final speech as president.
As he struggled to contain the applause Mr Obama quipped: "you can tell I'm a lame duck because nobody is following instructions".
"Michelle and I have been so touched by all the well wishes that we've received over the past few weeks, but tonight - tonight it's my turn to say thanks," he began.
"Whether we have seen eye to eye or rarely agreed at all, my conversations with you, the American people, in living rooms and in schools, at farms, on factory floors, at diners, and on distant military outposts - those conversations are what have kept me honest and kept me inspired, and kept me going.
"And every day I have learned from you. You made me a better president and you made me a better man."
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