The White House has presented to Congress a plan to close the Guantanamo Bay detention facility, one of the president's long-standing goals.
He wants to transfer the remaining 91 detainees to their home countries or to US military or civilian prisons.
But Congress is deeply opposed to terror suspects being held on US soil and is expected to block the move.
The prison costs $445m (£316m) to run annually and closing it was a 2009 promise from President Barack Obama.
Human rights campaigners have repeatedly complained about the prison in Cuba, which has held 780 detainees since it opened in 2002.
The president told reporters on Tuesday it undermined national security.
"This is about closing a chapter in our history," said Mr Obama. "It reflects the lessons we've learned since 9/11 - lessons that must guide our nation going forward."
But Republican presidential candidate Marco Rubio was scathing in his criticism, saying Guantanamo prisoners do not belong on US soil.
"These are literally enemy combatants," he said, adding he would ship terrorists straight to Guantanamo "to find out what they know".
There are four main components in the White House plan:
- Transfer 35 detainees to foreign countries who have been designated to do so
- Do periodic reviews of remaining detainees to see if their detention is still necessary
- Continue to use legal tools to deal with remaining detainees
- Working with Congress to establish a location in the US to hold detainees who will not go to foreign countries
It estimates the move would save up to $180m (£128m) a year in cost savings.
The president, who will complete his second and final term in January, said it was important not to pass the problem on to his successor.
"Keeping this facility open is contrary to our values. It undermines our standing in the world. It is viewed as a stain on our broader record of upholding the highest standards of rule of law.''
Analysis: Tara McKelvey, BBC White House reporter
President Obama has tried for years to close Guantanamo. He and his deputies say that it hurts the reputation of the US and that militants use "the infamous orange jumpsuit", as one senior administration official described it, as a recruiting tool.
But members of Congress have baulked at Mr Obama's plan to close the prison, saying they believe it should remain open - and they don't want any detainees to be transferred to the US. Representative Mike Pompeo of Kansas, for example, said the prisoners should "stay right where they are".
Lately, though, White House officials said that lawmakers, or at least some of them, seem more receptive to the idea.
A senior administration official told reporters that there's "room for conversation". That's important since Mr Obama has less than a year to close the prison - and for him time is of the essence.
Guantanamo Bay is located on an American naval base in south eastern Cuba. Former US President George W Bush opened it to accommodate foreign terror suspects after the 9/11 attacks on the US.
One of the key complaints from human rights groups is that many detainees have been held there without charge or trial.
White House officials said they could not give any names of people being held, but the New York Times has its own list.
The Obama plan does not specify where in the US detainees would go.
But the Pentagon has considered 13 different locations in the US, including seven prisons in Colorado, South Carolina and Kansas, and six other places on military bases.