Obama did not explicitly call on Mubarak to resign, but said the Arab strongman had already made the psychological leap of realizing his rule was ebbing, and now should reconsider his position amid a mass uprising.
The US president staked out a veiled, but forceful, position as tens of thousands of demonstrators held "departure day" protests in Cairo, and the United States sought a way to prod Mubarak to the exit after 30 years in power.
"I believe that President Mubarak cares about his country. He is proud, but he is also a patriot," Obama said.
"What I've suggested to him is, is that he needs to consult with those who are around him in his government.
"He needs to listen to what is being voiced by the Egyptian people, and make a judgment about a pathway forward that is orderly, but that is meaningful and serious."
Obama did not explicitly say Mubarak should leave power immediately, with the White House highly sensitive to perceptions that it is engineering Egypt's political future in a region that pulsates with anti-American feeling.
But his choice of words made clear that Washington's call for an immediate political transition did not include its wily ally of three decades, who has been a fulcrum of US Middle East policy.
"The key question he should be asking himself is, 'how do I leave a legacy behind in which Egypt is able to get through this transformative period?'" Obama said.
"My hope is, is that he will end up making the right decision."
Amid reports that Washington was working on a number of scenarios with key players in Cairo that would result in Mubarak's departure, Obama stressed Egyptians must decide their future themselves.
But he said he understood "some discussions" were already underway in Egypt on a transition to a system that would respect universal rights and lead to free and fair elections.
Mubarak's one-time foreign minister and a future possible presidential candidate, Arab League chief Amr Mussa, meanwhile said he doubted his former boss would leave any time soon.
The New York Times reported that Washington has been pushing proposals for Omar Suleiman, Mubarak's veteran intelligence chief and now vice president, to head a transitional government.
The White House took issue with aspects of the report, but did not deny it outright, and its response hinted that the United States may be studying a range of options to prod Mubarak to go and defuse the confrontation in Cairo.
"It's simply wrong to report that there's a single US plan that's being negotiated with the Egyptians," a senior White House official said on condition of anonymity.
Egypt's Prime Minister Ahmed Shafiq however ruled out the possibility that Mubarak would transfer power to Suleiman.
Amid signs of intense US diplomacy on a crisis which could impact Washington's foreign policy for years, Secretary of State Hillary Clinton headed to a major security conference in Munich with Egypt topping her agenda.
During the flight, she called Egyptian foreign minister Ahmed Abul Gheit and was in "constant" touch with Washington, a State Department official said.
US Defense Secretary Robert Gates meanwhile spoke by phone to his Egyptian counterpart, Field Marshal Mohammed Hussein Tantawi.
The Pentagon is apparently seeking to guard its ties with Egypt's politically powerful military.
The chairman of the Joint Chiefs of Staff cautioned against cutting the 1.3 billion dollars in US annual support to the Egyptian military, following signals from the White House that the aid bonanza was under review.
"I would just caution against doing anything until we really understand what's going on," Admiral Mike Mullen said in an interview on media.
For years, Egypt has been the second largest recipient of US foreign aid after Israel.
Obama also delivered another unequivocal warning that violence against journalists, human rights activists and journalists was unacceptable, though said he was pleased with restraint shown on a mass day of protests on Friday.
Speaking at a press conference with Canadian Prime Minister Stephen Harper, Obama said he told Mubarak clearly in two telephone calls that the "old ways" that had sustained his 30-year-rule were not going to work.
"Suppression is not going to work, engaging in violence is not going to work."
Later Friday the White House said Obama had spoken to key regional ally Recep Tayyip Erdogan, prime minister of Turkish prime minister to discuss the situation in Egypt, and the pair agreed their countries "would continue to consult closely as events unfold in Egypt."
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