He said Islamic State (IS) fighters would be targeted to prevent the slaughter of religious minorities, or if they threaten US interests.
Strikes have not yet begun, but the US has made humanitarian air drops to Iraqis under threat from the militants.
IS has seized Qaraqosh, Iraq’s biggest Christian town, forcing locals to flee.
The Sunni Muslim group, formerly known as Isis, has been gaining ground in northern Iraq and Syria for several months.
In a rapid advance in June the group took control of the northern city of Mosul and advanced south towards Baghdad.
It now controls large swathes of Iraq and Syria and says it has created an Islamic caliphate in its territory.
‘Coming to help’
Speaking at the White House, Mr Obama said US military aircraft had already dropped food and water to members of the Yazidi religious minority community trapped on Mount Sinjar by IS fighters.
The Yazidis face starvation and dehydration if they remain on the mountain, and slaughter at the hands of the IS if they flee, officials have warned.
Mr Obama said the US could not turn a “blind eye” to the prospect of violence “on a horrific scale”, especially when the Iraqi government had requested assistance.
He said the US would act “carefully and responsibly, to prevent a potential act of genocide”.
US air strikes would target IS fighters if they threaten Baghdad or move towards the Kurdish capital of Irbil, where there is a significant presence of US diplomats and military advisers, Mr Obama said.
In addition, he authorised strikes “if necessary” to help Iraqi government forces break the siege at Mount Sinjar and rescue the trapped civilians.
“The only lasting solution is reconciliation among Iraqi communities and stronger Iraqi security forces,” Mr Obama added.
For a president still busy withdrawing his troops from Afghanistan, the situation in northern Iraq has proved decisive.
Doing nothing here was not an option and the US could not turn a blind eye to what Mr Obama called the systematic destruction of Christians and Yazidis.
He employed strong language to seek justification. It was, he said, to prevent acts of genocide.
It is a hugely symbolic and potent term for a president who a year ago decided against military intervention in Syria. And that was after a red line had been crossed and chemical weapons had been used.
This time, just across the border, the White House has a specific goal – the protection of US assets and embassy personnel in Iraq and to bring urgent relief to the civilians affected.
But to critics it is too limited an operation that will do little to diminish the power of the Islamic State jihadists.