However, Obama warned that there would be continuing challenges in the troubled country, as evidenced by a car bombing earlier in the day that killed at least 20 in Kirkuk.
"Today, American troops have transferred control of all Iraqi cities and towns to Iraq's government and security forces," Obama said to the applause of an audience that gathered to celebrate innovative community service programs in the East Room.
He added, "It's a part of our strategy to responsibly end the war by removing all American combat brigades from Iraq by next September, and all of our troops from Iraq by the end of 2011."
Obama said that the Iraqi people are rightly celebrating the handoff.
"This is an important step forward, as a sovereign and united Iraq continues to take control of its own destiny. And with this progress comes responsibility," he said. "Iraq's future is in the hands of its own people. And Iraq's leaders must now make some hard choices necessary to resolve key political questions, to advance opportunity, and to provide security for their towns and their cities."
America will remain a "strong partner" to Iraq in its development, Obama said, but he warned of further potential trouble.
"Make no mistake: There will be difficult days ahead. We know that the violence in Iraq will continue -- we see that already in the senseless bombing in Kirkuk earlier today," he said. "And there are those who will test Iraq's security forces, and the resolve of the Iraqi people, through more sectarian bombings and the murder of innocent civilians."
He added, "But I'm confident that those forces will fail. The future belongs to those who build, not those who destroy."
Obama also said that the celebrations of the Iraqis on taking security responsibility is a testament to the civilians and troops that have worked to rebuild and protect the nation following the U.S. invasion to topple Saddam Hussein.
"Through tour after tour of duty, our troops have overcome every obstacle to extend this precious opportunity to the Iraqi people," he said. "These women and men are not always in the headlines, but they're in our hearts and prayers, and we will forever honor their selfless service and sacrifice, as well as the service and sacrifice of their families."
The president added, "There is more work to be done, but we've made important progress in supporting a sovereign, stable and self-reliant Iraq. And everyone who has served there, both in uniform as well as our civilians, deserves our thanks."
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