Speaking at Arlington National Cemetery, Obama said US troops would continue to return over the coming months, before the withdrawal of most NATO combat troops by the end of 2014.
"This winter our troop levels in Afghanistan will be down to 34,000," he said.
"And by this time next year, the transition to Afghan-led security will be nearly complete. The longest war in American history will end."
Washington is negotiating with the Afghan government to secure an agreement on leaving a residual force behind to train the country's fledgling armed forces and for possible anti-terror missions.
"Today we can say that because of their heroic service, the core of Al-Qaeda is on the path to defeat, our nation is more secure, and our homeland is safer."
Obama's changing rhetoric on Al-Qaeda has encapsulated the evolving threat from the organisation and its affiliates.
Before his re-election race last year, Obama often said the extremist group was "on the run," had seen its leadership "decimated" or was "on the path to defeat" due to his anti-terror policies.
At today's ceremony, Obama also highlighted the remarkable life of 107-year-old World War II soldier Richard Overton, believed to be the oldest remaining American veteran of the conflict.
"He was there at Pearl Harbor when the battleships were still smoldering," Obama said, of Overton, an African American.
"He was there at Okinawa. He was there at Iwo Jima."
"When the war ended, Richard headed home to Texas, to a nation bitterly divided by race, and his service on the battlefield was not always matched by the respect that he deserved at home.
"This is the life of one American veteran living proud and strong in the land he helped keep free.
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