The move comes after a request last month from the State Department for additional US troops to bolster security for the US embassy and other facilities in Iraq, where Islamic State (IS) extremists have seized territory in the north and west of the country.
White House and Pentagon officials issued the announcement hours after the IS jihadists released another grisly video showing a masked militant with a British accent cutting the throat of an American captive.
The Sunni extremist group, also known as ISIL, has declared an Islamic "caliphate" in regions under its control in Iraq and Syria, after it swept through much of the Sunni Arab heartland north of Baghdad and then stormed minority Christian and Yazidi areas.
US aircraft have been bombing IS extremists in Iraq since August 8, particularly around the Mosul dam in the north, and Washington already has deployed hundreds of troops to shore up security for its diplomats in Baghdad.
"The president authorized the Department of Defense to fulfill a Department of State request for approximately 350 additional US military personnel to protect our diplomatic facilities and personnel in Baghdad, Iraq," the White House said in a statement.
The United States will "continue to support the government of Iraqs efforts to counter ISIL, which poses a threat not only to Iraq, but to the broader Middle East and US personnel and interests in the region," it said.
Obama, on his way to Estonia and a NATO summit in Wales, said Washington "will be consulting this week with NATO allies regarding additional actions to take against ISIL and to develop a broad-based international coalition to implement a comprehensive strategy to protect our people and to support our partners in the fight against ISIL."
The latest troop deployment brings the number of forces devoted to security for US diplomats in Iraq to 820, the Pentagon said. An additional 300 troops are serving as "advisors" to Iraqi security forces, for a total footprint of more than 1,000 troops.
Under the presidents decision, about 400 troops will head to Baghdad and about 55 forces that have been on the ground will rotate out of the country, officials said.
The additional US forces will come from bases in the Middle East and will include a headquarters element, medical personnel, an air liaison team and a number of helicopters, according to Pentagon spokesman Rear Admiral John Kirby.
The troop deployment is designed "to provide a more robust and sustainable security presence to help the Department of State continue their critical mission," Kirby said in a statement.
The troop decision was announced with little fanfare in emails to reporters, instead of at White House or Pentagon briefings in front of television cameras.
Obama was elected in 2008 on a promise to end the US war in Iraq and he touted the departure of all US forces from the country in 2011 when he ran for re-election in 2012.
But the onslaught of the IS jihadists has prompted a reluctant Obama to reverse course, sending in troops and ordering air strikes to try to counter the advance of the extremists.
The Obama administration has said the US military intervention is limited to safeguarding US personnel, supporting humanitarian efforts to protect threatened civilians and assisting Iraqi government forces battling the IS extremists.
But Obamas critics say he has moved too slowly in the face of the threat posed by the IS militants.