The move is widely believed to be an attempt to protect the region before Mr Obama leaves office in January.
Supporters of president-elect hope that Donald Trump could find it difficult to reverse the decision.
Canada has also committed to a similar measure in its own Arctic waters.
The White House said the decision was for "a strong, sustainable and viable Arctic economy and ecosystem." It cited native cultural needs, wildlife concerns, and the 'vulnerability' of the region to oil spills as justification for the ban.
But while Canada will review the move every five years, the White House insists Mr Obama's declaration is permanent.
The decision is based on a 1953 law which allows the president to ban leasing of offshore resources indefinitely.
During the election campaign, Donald Trump vowed to take advantage of existing US oil reserves, prompting concern from environmental groups. However, supporters have already suggested that any attempt to reverse the 'permanent' decision outlined by the law would be open to a legal challenge. Reacting to the Arctic declaration, Friends of the Earth said: "No president has ever rescinded a previous president's permanent withdrawal of offshore areas from oil and gas development.
"If Donald Trump tries to reverse President Obama's withdrawals, he will find himself in court."
However, API said "there is no such thing as a permanent ban," and that it hoped Mr Trump's administration would simply reverse the decision.
Boost for conservation
The ban is a huge boost for conservation in the fragile waters of the Arctic - and for campaigners urging action against climate change.
The oil industry has a bad safety record in northern waters already. In 1989 the tanker Exxon Valdez ran aground in Alaska, spilling hundreds of thousands of barrels of crude oil, polluting 1300 miles of coastline. Some of the oil endures, and some animal species have yet to recover.
In 2014, Shell's drilling rig the Kulluk also ran aground in the Arctic's tempestuous seas. The firm subsequently halted Arctic exploration.
Northern waters are so cold that it takes bacteria much longer to break up oil products than in the warm waters of the Gulf. And the drilling conditions are among the most challenging on Earth.
For more information please visit:
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/21122016/obama-bans-oil-drilling-in-arctic-waters/