The president scrapped sanctions implemented 11 years ago against former strongman Charles Taylor.
Taylor is now in a maximum-security prison for a series of war crimes.
President Obama said that Taylor’s imprisonment meant that sanctions were no longer necessary.
He said that he and his allies now had a “diminished ability” to “undermine Liberia’s progress”.
National Security Council spokesman Ned Price said that the US wanted to congratulate the people of Liberia “for their determination, ingenuity and commitment to peace and democracy” that has made the lifting of sanctions possible.
Taylor and his inner circle fuelled a brutal 1991-2002 civil war in Liberia that killed tens of thousands of people.
He was arrested in 2006 and charged by the International Criminal Court in The Hague with 11 counts of war crimes and crimes against humanity for acts committed by rebels in Sierra Leone who he aided and abetted.
Taylor was sentenced to 50 years in jail for what judges described as “some of the most heinous crimes in human history”.
The former Liberian leader is now being held in a maximum-security British prison.
Liberia has been led by Nobel Prize winner Ellen Johnson Sirleaf since 2006. She has worked closely with the West in tackling Ebola.