Oil giant BP is to put $20bn (£13.5bn) in a compensation fund for victims of the Gulf oil spill and will not pay shareholders a dividend this year.
Barack Obama announced the compensation deal after talks at the White House with senior BP executives.
Shortly afterwards, BP chairman Carl-Henric Svanberg said dividends would not be paid for the rest of this year.
The payout fund is to be run by Kenneth Feinberg, a lawyer who oversaw compensation after the 9/11 attacks.
In his current role as Mr Obama's "pay tsar", Mr Feinberg sets salary limits for executives at firms in receipt of federal bailout funds.
Mr Obama said a $120m fund would also be set up to compensate oil industry workers.
He said he had heard growing concerns about the pace of compensation payments, and that the new fund would ensure all "legitimate" claims were paid.
"If you or your business has suffered economic loss as a result of this spill you will be able to file a claim," the president said.
Although BP has agreed to fund $20bn - roughly equivalent to one year of BP's annual profits - reports said there could be no cap on the amount BP might be asked to contribute to the fund.
The company will pay $5bn into the fund, called an escrow fund, before the end of 2010, plus $1bn per quarter for the following three years.
Speaking after the talks, Mr Svanberg expressed regret over the spill, saying BP felt "sorrow and sadness for the tragic accident which should never have happened".
"Words are not enough. We understand we will and we should be judged by our actions," he said.
"We will live up to all our legitimate responsibilities."
Mr Svanberg was also forced to apologise after telling reporters that BP was not a greedy company and that it cared "about the small people". He later said he "spoke clumsily".
The last time that BP suspended a dividend payment was during World War II. The company was due to make a $2.6bn dividend payment on Monday, which has now been cancelled.
In addition, BP said it would sell off "non-core" assets worth some $10bn in an attempt to cut costs in the coming year.
BP's chief executive, Briton Tony Hayward, and the boss of BP America, Lamar McKay, accompanied Mr Svanberg to the White House.
Mr Hayward, who has come under heavy criticism for his handling of the crisis, is scheduled to give evidence to a US House of Representatives committee on Thursday.
There remains some confusion over how far the definition of "legitimate responsibilities" should stretch. Earlier in the day UK Prime Minister David Cameron said BP was concerned the claims could be submitted "three or four times removed" from the spill.
The company has been accused of failing to follow proper procedures in the run-up to the explosion on the Deepwater Horizon rig on 20 April.
The blast led to the deaths of 11 people, caused the rig to sink and has since seen hundreds of thousands of barrels of oil spew into the Gulf of Mexico.
Some of that oil is now washing ashore in states along the Gulf coast.
The fallout is affecting businesses and wildlife, as well as wiping billions of dollars off BP's value.
BP's share price rose in US trading after an earlier slump as news of the funding deal emerged, but dipped as the day wore on and more details emerged.
In its latest effort to contain the oil spewing into the Gulf of Mexico, BP announced on Wednesday morning that it had begun operating a second containment system designed to bring oil and gas to the surface for burning.
BP managed to place a cap over the leaking oil pipe earlier this month, and is now collecting some of the oil.
However, estimates of how much oil is gushing out of the well have again risen dramatically since the start of the crisis.
A government panel of scientists now believes 35,000-60,000 barrels are leaking each day, up from its estimate last week of 20,000-40,000.
You can follow the testimony of BP chief executive Tony Hayward when he appears before a US Congress committee on the BBC News website on Thursday 17 June, from 1400 BST (1000 EST).