"I'm responsible for the deployment of thousands of young Americans to battle in a distant land. Some will kill, and some will be killed," Obama said, during a glittering ceremony in Oslo City Hall.
"So, I come here with an acute sense of the costs of armed conflict -- filled with difficult questions about the relationship between war and peace, and our effort to replace one with the other."
Obama's elevation to a pantheon of winners alongside the likes of Nelson Mandela, Mother Teresa and Martin Luther King came before he had even spent a year in office.
A day of celebrations in Oslo saw Obama and his wife Michelle Obama wave to a crowd from behind bullet proof glass, attend a sumptuous black tie banquet and meet Norway's King Harald and Queen Sonja.
But some Norwegians were upset that Obama cut short the normal three days of Nobel celebrations, citing a tangle of political woes back home.
There were also polite protests by an anti-nuclear group which marched through Oslo holding lighted torches, and appeared friendly to Obama, who has vowed to cut US and Russian atomic weapons stocks.
In a separate demonstration, peace protestors took to the streets, chanting "Yes, Yes, Yes We Can, Stop the War in Afghanistan." In all, police said, between 12,000 and 15,000 protestors and onlookers converged in front of the Grand Hotel where Obama was staying.
Norwegian police rolled out their most elaborate security operation ever to protect the president, with barricades, helicopters and hundreds of officers deployed.
Obama said he received the award with "great humility", after commenting earlier that he was sure others deserved it more.
"Compared to some of the giants of history who have received this prize -- (Albert) Schweitzer and King; (George) Marshall and Mandela -- my accomplishments are slight."
Later, at the banquet, Obama joked that after hearing the appreciative introduction from the chairman of the Norwegian Nobel Committee, Thorbjoern Jagland, he had almost begun to believe his own hype.
"I thought it was an excellent speech, and I was almost convinced that I deserved it," Obama said.
The president also said the Nobel committee had put the wind behind the sails of the US civil rights movement by awarding King the 1964 prize -- and was therefore partly responsible for his rise as the first black US president.
Obama, who like other Nobel winners received a diploma, a medal and 10 million kronor (1.4 million dollars), dwelled at length on his responsibility fighting conflicts in Iraq and Afghanistan.
"War is sometimes necessary, and war is at some level an expression of human feelings," Obama said.
The United States "has helped underwrite global security for more than six decades with the blood of our citizens and the strength of our arms," he said highlighting conflict in Europe and Asia.
"Our actions matter, and can bend history in the direction of justice," Obama said, warning that diplomacy must be backed by "consequences" to beat repression.
Warning that war is "never glorious, and we must never trumpet it as such," Obama argued that it could "sometimes be not only necessary but morally justified," saying negotiations would not end the Al-Qaeda threat.
The US leader paid tribute to anti-government demonstrators in Iran, Myanmar and Zimbabwe and said the United States would always stand on the side of those who sought freedom.
"We will bear witness to the quiet dignity of reformers like Aung Sang Suu Kyi; to the bravery of Zimbabweans who cast their ballots in the face of beatings; to the hundreds of thousands who have marched silently through the streets of Iran," Obama said.
Responding to international controversy over the award, Jagland told the prize ceremony that "history can tell us a great deal about lost opportunities."
"It is now, today, that we have the opportunity to support President Obama's ideas. This year's prize is indeed a call to action for all of us."
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