The visit was one of several events for the day which added layers of symbolic gestures to a trip short of real substance, but laden with presidential appeals for both Israelis and Palestinians to resume long-stalled peace talks.
Obama also paid his respects at the tomb of the founder of modern Zionism, Theodor Herzl,and also the grave of murdered Israeli prime minister Yitzhak Rabin who has become a symbol of the peace process.
Officials said the visit was aimed at correcting an impression the president had given in a speech in Cairo in 2009, where he appeared to argue that the legitimacy of the Jewish state stemmed from the Holocaust.
Obama has attempted to win over a sceptical Israeli public during his trip, assuring them of full US support at a time of growing tensions with Iran over its nuclear ambitions and anxiety tied to the burgeoning civil war in Syria.
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OBAMA TO FACE SYRIA SCRUTINY IN JORDAN
The president was due to fly to nearby Jordan in the afternoon for talks with King Abdullah, a key US Middle East ally.
While the thrust of his Israel trip was reassurance that the United States would mount an "eternal" defence of the Jewish state in the face of the Iranian nuclear threat, Obama will turn to the agony of Syria's civil war in Jordan.
Jordan is sheltering nearly 436,000 Syrian refugees, a figure expected to rise to 700,000 by the end of this year, as people fleeing vicious sectarian fighting between Bashar al-Assad's forces and rebel groups spill over its borders.
Obama has resisted pouring US arms or ammunition into the conflict, which the UN estimates has taken at least 70,000 lives, but has offered logistical support to rebels and hundreds of millions of dollars in humanitarian aid.
He will also support political reform efforts inside Jordan, which has been an oasis of relative calm in a region swept turmoil following the Arab Spring.
A senior US official said Obama wanted to coordinate with the king on security challenges and on helping Jordan alleviate the refugee crisis.
"We're providing a lot of assistance to support Jordan and international organisations that are supporting the refugee population inside of Jordan," he said.
"We're also working very closely with the Jordanian government as part of the coalition of countries that is supporting the Syrian opposition to pressure the regime, to build up the opposition, and try to bring about a new Syria."
While in Jerusalem, Obama said the United States was investigating claims that chemical weapons had been used in Syria, warning it would be a "gamechanger" that could spark international intervention, and that Assad's regime would he held accountable.
Obama on Friday visited the grave of Herzl, the father of modern Zionism, then paid his respects at the grave of murdered premier Rabin.
On a hot and windy morning, he walked slowly up to the grave flanked by Israeli Prime Minister Benjamin Netanyahu and President Shimon Peres, where he spent a few minutes alone.
On the grave, he placed a stone from the grounds of Washington's Martin Luther King memorial, before heading to the nearby Yad Vashem Holocaust Museum.
He was to hold a brief lunch meeting with Netanyahu before a quick hop to Bethlehem's Church of the Nativity, which Christians revere as the birthplace of Christ
Obama was expected to leave for Jordan aboard Air Force One at 1315 GMT.
In a powerful direct appeal to young Israelis on Thursday, Obama insisted that a two-state peace with the Palestinians could still be forged and was their only hope of true security.
"You can be the generation that permanently secures the Zionist dream," he said in a soaring speech, urging his audience to "look at the world through (Palestinian) eyes" and warning the two-state answer was the only way to ensure Israel remained a Jewish state in view of the changing demographics.
His oration won praise from Peres at a state dinner, who said he was "moved by the way in which you spoke to the hearts of young Israelis."
Palestinian president Mahmud Abbas also welcomed the address, a senior official said.
"President Abbas welcomed President Obama's speech in Jerusalem saying that achieving peace and the option of two states on the 1967 borders are the way to bring security for the Israeli and Palestinian peoples," peace negotiator Saeb Erakat told AFP.
Earlier, Obama's edgy news conference with Abbas in Ramallah reflected Palestinian disappointment with his failure to live up to first-term vows to help forge a Palestinian state.
The frosty atmosphere lacked the bonhomie of his bonding session with Netanyahu on Wednesday, as the two sought to prove their prickly relationship was a thing of the past.
In Ramallah, Obama condemned the "continuing threat" from the Hamas-run Gaza Strip after two rockets hit southern Israel in an attack claimed by a radical Salafist group.
Obama said that the two-state solution was still a possibility, despite claims that Israeli settlement building had obliterated hopes of a contiguous state.
Although he singled out Jewish settlements as a major impediment to reviving peace talks, Obama did not call for a new construction ban.
But Abbas told Obama that a freeze was a must if peace talks were to resume, his political adviser Nimr Hammad said.
