The 44th US president and the first African American to claim the Oval Office was returned to power after a joyless election which appears to have deepened, rather than healed, his nation's political divides.
"In this election, you, the American people, reminded us that while our road has been hard, while our journey has been long, we have picked ourselves up, we have fought our way back," Obama, 51, said at a victory party in Chicago.
"I have never been more hopeful about America. And I ask you to sustain that hope," Obama said, striving for inspiration rarely shown in a campaign where the prophet of hope of 2008 became a conventional, brawling politician. Full text of Obama's speech
"I have always believed that hope is that stubborn thing inside us that insists, despite all the evidence to the contrary, that something better awaits us so long as we have the courage to keep reaching, to keep working, to keep fighting.
US President Barack Obama walks on stage with first lady Michelle Obama and daughters Sasha and Malia to deliver his victory speech on election night in Chicago, Illinois. Scott Olson/Getty Images/AFP
"We want to pass on a country that is safe and respected…a nation that is defended by the strongest military on earth and the best troops that the world has ever known. "We believe in a generous America, a compassionate America," said the Nobel laureate, who won the Peace Prize in 2009. This happened because of you. Thank you: Obama
With only Florida among the battleground states still to be declared, Obama had 303 electoral votes, well over the 270 needed to win the White House.
He had a slim lead in the national popular vote, leading Romney by 50% to 49%, after drawing more than 56 million votes. Turnout appeared strong, though official figures had yet to be released.
As Obama's victory was confirmed with wins in rustbelt Ohio and his spiritual political home in Iowa, large crowds suddenly materialized outside the White House, chanting "four more years" and "O-bama, O-bama."
Republican nominee Romney, 65, deflated and exhausted, offered a classy tribute, as he consoled dejected supporters in Boston moments after phoning Obama to formally concede.
"This is a time of great challenges for America and I pray that the president will be successful in guiding our nation." Romney said.
In a show of bipartisanship after a searing campaign, the president said he wanted to meet his vanquished foe to find common ground to move America forward. Obama's victory means that he will get the chance to embed his healthcare and Wall Street reforms deep into the fabric of American life -- Romney had pledged one of his first acts would be the repeal of Obamacare.
He may also get the chance to reshape the Supreme Court in his liberal image for a generation, a move that would shape policy on issues like abortion and gay rights.
The president will also look abroad as he builds his legacy, and will face an immediate challenge early in 2013 over whether to use military force to thwart Iran's nuclear program.
Obama's win on Tuesday bucked history, as it came with the unemployment rate pegged at 7.9%, the highest level for a re-elected president in more than 70 years.
Remarkably, his coalition of Hispanic, black, and young voters turned out in similar numbers to those of his heady change-fueled campaign in 2008, shocking Romney's team and presenting a new American face to the world.
But once the euphoria fades, the president will face a tough task enacting his second term agenda after Republicans, who thwarted him repeatedly in his first mandate, retained control of the House of Representatives.
Democrats kept the Senate but fell short of the 60-vote super majority needed to sidestep Republican blocking tactics.
The president paved the way to victory with a staunch defense of Democratic bastions in Pennsylvania, Wisconsin and Michigan, at which Romney had taken a last-minute run when he saw more conventional paths to the White House blocked.
(From L-R) First Lady Michelle, US President Barack Obama, Vice-President Joe Biden and Second Lady Jill Biden acknowledge supporters following Obama's victory speech in Chicago. AFP Photo
Obama also locked in swing states, including Virginia -- where he became the first Democrat to win since 1964 four years ago -- Nevada, Ohio, New Hampshire, Colorado and Iowa, crushing Romney's slim hopes of a viable path to victory.
Romney could only wrestle Indiana and North Carolina from Obama's 2008 map.
The win in Iowa will be especially sweet for Obama, as the heartland state nurtured his unlikely White House dreams way back in 2007. A tear rolled down his cheek as he held his last-ever campaign rally there late Monday.
His victory in Ohio represents a delayed repayment for his gutsy call in 2009 to mandate a federal bailout of the auto industry, on which one in eight jobs in the state depend. Romney had opposed the move.
Obama won with a fiercely negative campaign branding Romney -- a multi-millionaire former corporate turnaround wizard -- as indifferent to the woes of the middle class.
Exit polls showed that though only 39% of people believed that the economy was improving, around half of Americans blamed former Republican president George W. Bush for the tenuous situation, and not Obama.
Obama's victory was a complete vindication for a campaign team that had predicted a close but winnable election, despite the painful after-effects of the deepest economic crisis since the 1930s Great Depression.
People celebrate as they watch US President Barack Obama's acceptance speech broadcast live in Times Square following his re-election in New York. Reuters Photo
He was also helped by Latino voters, whose strong support was crucial in the desert state of Nevada and the Rocky Mountain state of Colorado.
Republicans had insisted right up to election day that Obama's army, disaffected by busted expectations for his first term, would stay home, and had predicted instead a late Republican wave that would elevate Romney.
The president ran for re-election on a platform of offering a "fair shot" to the middle class, of fulfilling his pledge to end the war in Iraq, killing Osama bin Laden, and starting to build a clean energy economy.
Now Obama will face a showdown with Republicans on Capitol Hill, on the so-called "fiscal cliff" involving the expiry of Bush-era tax cuts and a need to raise the US debt ceiling.
Ruinous budget cuts designed to trim the ballooning deficit, which could tip the economy into recession, are also about to come due, unless Obama can reach a deal with Republicans, who have opposed him tooth and nail for four years.
The president may have been helped at the 11th hour when superstorm Sandy roared ashore, killing more than 100 Americans but giving Obama the chance to project leadership as the head of a multi-state disaster response.
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