The president scrapped sanctions implemented 11 years ago against former President Charles Taylor.
Taylor is now in a  maximum-security prison for a series of war crimes.
President Obama said that Taylor's imprisonment meant that sanctions were no longer necessary.
He said that he and his allies now had a "diminished ability" to "undermine Liberia's progress".
National Security Council spokesman Ned Price said that the US wanted to congratulate the people of Liberia "for their determination, ingenuity and commitment to peace and democracy" that has made the lifting of sanctions possible.
Taylor and his inner circle fuelled a brutal 1991-2002 civil war in Liberia that killed tens of thousands of people.
He was arrested in 2006 and charged by a UN-backed court with 11 counts of war crimes and crimes against humanity for acts committed by rebels in Sierra Leone who he aided and abetted.
The Special Court for Sierra Leone trial was held at The Hague in case it sparked renewed unrest in West Africa.
Taylor was sentenced to 50 years in jail for what judges described as "some of the most heinous crimes in human history".
The former Liberian leader is now being held in a maximum-security British prison.
Liberia has been led by Nobel Prize winner Ellen Johnson Sirleaf since 2006. She has worked closely with the West in tackling Ebola.

The blast hit a facility owned by Mexico's state oil company, Pemex, in the port city of Coatzacoalcos.
Hundreds of people have been evacuated and schools closed. Footage showed a large fire and vast plumes of smoke.
The cause of the blast is unclear. Several explosions have been reported at Pemex facilities in recent years.
In pictures: Mexico explosion
The latest incident occurred at around 15:15 local time (20:15 GMT), Pemex said in a statement. Veracruz state Governor Javier Duarte told a radio station the blast was felt 10km (six miles) away.
The fire was under control by early evening, Pemex said. Residents were told to stay indoors because of the possible toxic nature of the smoke from the blast, but Pemex said the smoke dissipated quickly, lessening any possible toxic effects.
Of the 136 people injured, 88 remain in hospital, 13 of whom are in a serious condition, Pemex said.
Video posted on social media purporting to show a local hospital showed scenes of chaos and patients suffering heavy blood loss.
Pemex said the part of the factory hit by the explosion was managed by a sister company, Mexichem.
Associated Press reported that the plant produces vinyl chloride, a dangerous chemical used to make PVC pipes and packaging materials.
Exports of oil from the plant, one of the largest terminals for oil distribution in Mexico, would not be affected, the company added.
In September 2012, an explosion then a fire at a gas plant in the northern state of Tamaulipas killed 33 people.
Pemex's own headquarters in Mexico City was hit by a large gas blast in January 2013, killing 37 people.
A number of fires also struck the company's rigs in the Gulf of Mexico last year, and a worker was killed in another fire at the Veracruz plant in February this year.

The victim, 20, was found at a house in Crawley after paramedics were called about 03:00 BST.
He was found in Spencers Road, having sustained stab wound to the abdomen, and died a shortly afterwards in hospital.
Two men aged 24 and 22 and two 20-year-old men, all from Crawley, were detained and are in custody.
A police guard has been set up in Spencers Road and officers are speaking to residents in the area following the death of the man, who came from Mayfield.
The US has lifted economic sanctions against Liberia as President Barack Obama praised the country's commitment to democracy since the end of the 2003 civil war, the White House has said.
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A large explosion at an oil facility in the south-east Mexican state of Veracruz has killed at least three people and injured 136 more.
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Four people have been arrested on suspicion of murder after a man was found with serious injuries.