Congressional and administration sources say U.S. officials have the body of bin Laden. Further details around his death were not immediately available.
He was top of the US "most wanted" list.
Crowds gathered outside the White House in Washington DC, chanting "USA, USA" after the news emerged.
Bin Laden approved the 9/11 attacks in which nearly 3,000 people died, saying later that the results had exceeded his expectations.
He evaded the forces of the US and its allies for almost a decade, despite a $25m bounty on his head.
His death will be seen as a major blow to al-Qaeda but also raise fears of reprisal attacks, correspondents say.
Mr Obama said he had been briefed last August on a possible lead to Osama Bin Laden's whereabouts.
It led to intelligence that the al-Qaeda leader was hiding in a compound deep within Pakistan.
The president authorised an operation to "get Bin Laden" last week, he said, and on Sunday a small team of US forces undertook the operation.
After a "firefight" Bin Laden was killed and his body taken by US forces, the president said.