Obama had remained silent over plans to build an Islamic cultural center, which includes a mosque, two blocks away from the gaping Ground Zero hole where the Twin Towers were destroyed on September 11, 2001.
But after a New York city commission on August 3 unanimously approved the plans, the president came out to support the right to build the mosque.
"This is America," Obama said, "and our commitment to religious freedom must be unshakeable. The principle that people of all faiths are welcome in this country, and will not be treated differently by their government, is essential to who we are."
Obama acknowledged that the site where the World Trade Center towers once stood remains "hallowed ground," and that the 9/11 terror attacks "were a deeply traumatic event for our country."
Planners say the multi-story "Cordoba House" will include a mosque, sports facilities, theater, and restaurant, and would be open to the public to show that Muslims are full community members.
On Saturday the group 9/11 Families for a Safe & Strong America, which represents some relatives of attack victims, said it was "stunned" by the president's remarks.
Obama "has abandoned America at the place where America's heart was broken nine years ago, and where her true values were on display for all to see," the group said.
Building the mosque "is a deliberately provocative act that will precipitate more bloodshed in the name of Allah."
This president "declares that the victims of 9/11 and their families must ... stand silent at the last place in America where 9/11 is still remembered with reverence or risk being called religious bigots," the group said.
Another group representing other relatives of 9/11 victims, the September Eleventh Families for Peaceful Tomorrows, said in May that it "strongly supports" the Islamic center.
The proposed location has touched raw nerves -- and on Saturday Obama clarified that he was not addressing the appropriateness of the mosque's particular location.
"I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there," Obama said on a visit to Florida.
"I was commenting very specifically on the right people have that dates back to our founding. That's what our country is about," he said.
A CNN/Opinion Research poll earlier this month showed that 68 percent of Americans opposed the Islamic center plans, while only 29 percent favored them.
Congressman Peter King, who represents New York in the US House of Representatives, said the Muslim community was "abusing" its rights and "needlessly offending" many people.
"It is insensitive and uncaring for the Muslim community to build a mosque in the shadow of Ground Zero," said King, a Republican. "Unfortunately the president caved in to political correctness."
Obama said the Al-Qaeda terrorists responsible for the attacks do not represent Islam.
"It is a gross distortion of Islam," the president said late Friday. "In fact, Al-Qaeda has killed more Muslims than people of any other religion -- and that list of victims includes innocent Muslims who were killed on 9/11."
The Council on American-Islamic Relations, a US advocacy group, welcomed Obama's "strong support for Muslim religious rights."
Nihad Awad, a senior CAIR official, said he hoped the remarks will encourage "those who are challenging the rising level of Islamophobia in our society," and he urged "other national political and religious leaders" to speak out.
One of those reacting Saturday was New York Mayor Michael Bloomberg.
"I applaud President Obama's clarion defense of the freedom of religion," Bloomberg said, adding that the proposed site "is as important a test of the separation of church and state as we may see in our lifetime."
Passions over the issue run high across the country.
A Florida church has already said it will hold a "Koran-burning" on September 11 -- which this year coincides with Eid al-Fitr, the end-of-Ramadan holiday.
Obama himself is a Christian, but according to a Harris Interactive online poll from March, nearly one-third of all Americans, including 57 percent of Republicans, believe that he is a Muslim.