Immediately embraced by Latino groups, the extraordinary step touched off an election-year confrontation with Republicans.
"Let's be clear, this is not amnesty, this is not immunity, this is not a path to citizenship, this is not a permanent fix," Obama said from the White House Rose Garden. "This is the right thing to do."
The president announced this action will lift the shadow of deportation away from young illegal immigrants, known as DREAM-ers after the proposed but never passed DREAM Act.
Under the policy, undocumented immigrants brought to the U.S. before they were 16, who have lived here for five consecutive years, and are under 30 years old won’t be deported and will be eligible for a two-year work permit. They must be either high school students or graduates, hold a G.E.D., or have served in the military. If they’ve committed a felony, major misdemeanor, or multiple misdemeanors, they won't qualify and would still face deportation.
The Pew Hispanic Center estimates that 1.4 million illegal immigrants could benefit from the action.
The president’s speech was received with cheers and applause by Las Vegas DREAM Act supporters, who gathered Friday morning to watch the live television broadcast.
Astrid Silva, a 24-year old undocumented immigrant who has been the face of the DREAM Act movement in Las Vegas, called the announcement a “huge victory.”
Even thought the new policy will not grant undocumented youth legal status in this country, or a path to citizenship, Silva said it gave her hope that those benefits may ultimately be granted one day.
“We’re finally going to be considered Americans as we have always been,” Silva said fighting back tears. “We have always considered ourselves Americans. But now we wont have to hide for fear that we are going to be sent to a country we don’t know.”
College student Rafael Lopez, 23, said he now feels safe publicly stating that he is undocumented.
"Yes, I am a dreamer and I guess it is my coming out day of being a dreamer," he said. “I came here when I was only one year old and I've been here ever since. And, I've been in Las Vegas the whole time … this whole time … and I never want to leave, I love my city.”
Lopez is the type of person the president spoke about. “These are young people who study in our schools, they play in our neighborhoods, they’re friends with our kids, they pledge allegiance to our flag. They are Americans in their heart, in their minds, in every single way but one: on paper," Obama said.
But Stephen Yale-Loehr, who teaches immigration law at Cornell University, says the rule change could vanish depending on what happens in November.
"This is an administrative action, so if [Mitt] Romney wins the presidential election, he could take it away. So people should be cautious before they move forward," Yale-Loehr said.
Opponents of the ruling say it’s an election year stunt to pander to Latino voters. The step comes one week before Obama plans to address the National Association of Latino Elected and Appointed Officials' annual conference in Orlando, Fla. Republican presidential challenger Mitt Romney is to speak to the group on Thursday.
Arizona Senator John McCain criticized the ruling, saying it adds confusion and uncertainty to the country’s broken immigration system.
Maricopa County, Ariz. Sheriff Joe Arpaio told CNN's Wolf Blitzer, "This is all about the long range idea to make amnesty for all those people who are in this country illegally. That's the bottom line, this is just a precursor."
Arizona Gov. Jan Brewer called Obama's decision "outrageous." Both Brewer and Arpaio implied the timing was a pre-emptive strike against what they expect to be a favorable decision by the U.S. Supreme Court on Arizona's SB 1070. That decision could come as early as Monday.
But Brewer stopped short of saying DREAM-er children should be deported.
"Many of these young people have already contributed to our country in significant ways," Homeland Security Secretary Janet Napolitano wrote in a memorandum describing the administration's action. "Prosecutorial discretion, which is used in so many other areas, is especially justified here."
At a meeting of the Arizona Dream Act Coalition in Phoenix, Daniel Rodriguez says he’s proud of the work his group has done, despite the setbacks they’ve faced.
“After 2010, and after the failed DREAM Act vote in the Senate, a lot of people lost hope. And I have a lot of friends and lot of family that just decided to give up. And especially in Arizona, we had a lot of people that decided to leave. But the people that did stay decided to continue fighting and continue organizing," he said.
Rodriguez, who is undocumented, is thrilled by the president’s announcement. But he says work permits and relief from deportation aren’t enough, and that his group will keep pushing for a path to full citizenship.
The Associated Press contributed to this report.