He urged Israelis to empathize with the plight of Palestinians, using direct and harsh imagery to make his point, and he drew applause when he criticized the Israeli government's controversial policy of building new settlements in disputed territories.
Symbols and gestures
Hours before the speech on the second day of his Middle East swing, two rockets fired from Palestinian-controlled Gaza landed in southern Israel.
They caused no injuries or major damage, but served as a symbolic welcome to Obama's visit to the West Bank later in the day.
In another symbolic moment, Obama received the Presidential Medal of Distinction on Thursday night from Peres at the state dinner that emphasized the close ties between their countries.
In what Netanyahu called a key development of Obama's visit, the leaders announced new talks on extending U.S. military assistance to Israel for another 10 years past the current agreement, which expires in 2017.
During his earlier visit to Ramallah in the West Bank, Obama stressed the need for direct talks between Israelis and Palestinians for a two-state solution.
"The Palestinian people deserve an end to occupation and the daily indignities that come with it," he said at a news conference with Abbas, adding that Palestinians deserve "a future of hope" and a "state of their own."
The core issues right now, Obama said, are achieving sovereignty for Palestinians and security for Israel.
Abbas, however, said the Israeli settlements are "more than a hurdle to peace," calling them illegal and saying it was Israel's duty to stop building them.
He envisioned a Palestinian state based on 1967 borders with Jerusalem as capital -- a scenario unacceptable to Israel.