Mr Obama said initial investigations into the failed attack had found the information passed on by the father of Umar Farouk Abdulmutallab was not properly shared, meaning he was not barred from flying.
'Where our government has information on a known extremist and that information is not shared and acted upon as it should have so that this extremist boarded a plane with dangerous explosives that could have cost nearly 300 lives, a systemic failure has occurred and I consider that totally unacceptable,' he said.
'We need to learn from this episode and act quickly to fix the flaws in our system because our security is at stake and lives are at stake,' he said last night in a statement from Hawaii where he is holidaying with his family.
Mr Obama said the concerns of the suspect's father, expressed to US officials in his native Nigeria, had been passed to the US authorities 'weeks ago'.
'Weeks ago, this information was passed to a component of our intelligence community but was not effectively distributed so as to get the suspect's name on a no-fly list,' he said.
But he said even without that warning, the US had enough material to have ensured Abdulmutallab would not have been free to fly.
'There were bits of information available within the intelligence community which could have, and should have, been pieced together.
'Had this critical information been shared, it could have been compiled with other intelligence and a fuller clearer picture of the suspect would have emerged.
'The warning signs would have triggered red flags and the suspect would have never been allowed to board that plane for America.'
The anti-terrorism intelligence system put in place in the wake of the 9/11 attacks was 'not sufficiently up to date to take full advantage of the information we collect and the knowledge we have'.
The President paid tribute to the 'extraordinary' work of US intelligence in general, but conceded that in this case there had been 'a mix of human and systemic failures that contributed to this potentially catastrophic breach of security'.
While he was committed to providing all the tools and resources necessary, 'it is also my job to ensure the intelligence, law enforcement and homeland security systems, and the people in them, are working effectively and held accountable'.
I intend to fulfil that responsibility and insist on accountability at every level.'
Abdulmutallab, 23, a former engineering student at University College London, has reportedly told FBI agents he is one of many would-be terrorists in Yemen ready to carry out attacks in the near future.
He was president of the university's Islamic Society, which held lectures such as Jihad v Terrorism, which was billed as 'a lecture on the Islamic position with respect to jihad', and hosted talks by former Guantanamo Bay detainees.
His wealthy family said they believed he was radicalised while attending the British International School in Lome, the capital of Togo and after he broke off contact, they approached foreign security agencies expressing concern about his state of mind and requesting 'assistance to find and return him home'.
Home Secretary Alan Johnson has revealed Abdulmutallab was banned from entering Britain and placed on a 'watch list' earlier this year. He was refused a new visa and was monitored since last May after applying for a bogus course.
Al Qaeda in the Arabian Peninsula, an alliance of militants based in Saudi Arabia and Yemen, said the action was retaliation for a US operation against the group in Yemen.
The group said in an internet statement that the failed attack exposed the 'large myth' of American and international security services and claimed only a 'technical error' had prevented the bomb from detonating.
Yemeni foreign minister Abu Bakr al-Qirbi said there were as many as 300 Al Qaeda militants planning terror attacks from his country and appealed for more help from the international community to train and equip forces to root them out.
Dr al-Qirbi said it was the 'responsibility' of countries with strong intelligence capabilities to warn states such as Yemen about the movements of terror suspects.
And he said that the US, Britain and the EU could do 'a lot' to improve Yemen's response to militants on its own soil.
'We have to work in a very joint fashion in partnership to combat terrorism,' he said. 'If we do, the problem will be brought under control.
'There is support, but I must say it is inadequate. We need more training, we have to expand our counter-terrorism units and provide them with equipment and transportation like helicopters.'
Nigerian-born Abdulmutallab is being held at a federal prison in Michigan on a charge of trying to destroy an aircraft after attempting to ignite the device as the plane made its final descent into Detroit on Friday.
In his first public statement on the issue on Monday, Mr Obama announced reviews into 'what went wrong' with airport security and the monitoring of suspected terrorists.
Preliminary findings are due to be presented tomorrow, he said in his latest statement.
Photographs apparently showing the underpants filled with explosives allegedly worn by Abdulmutallab were broadcast by ABC News.
The American government pictures show the singed underwear with a six-inch packet of a high explosive called PETN sewn into the crotch, the US network reported.
ABC News said Abdulmutallab was carrying about 80g of PETN, more than one-and-a-half times the amount carried by 'shoe bomber' Richard Reid in 2001 and enough to blow a hole in the side of an aircraft.
His former tutors at University College London, where he was a student between 2005 and 2008, described him as 'well-mannered, quietly spoken, polite and able' and said he never gave any cause for concern.
He apparently wrote of his loneliness and struggle between liberalism and Islamic extremism in a series of postings on Facebook and in Islamic chatrooms, the Washington Post reported.
In January 2005, when he was attending boarding school, he wrote: 'I have no one to speak to. No one to consult, no one to support me and I feel depressed and lonely. I do not know what to do. And then I think this loneliness leads me to other problems.'
British police and MI5 have been diverting resources to investigate the importance of the Nigerian's links to London.
Throughout the weekend, search teams combed the imposing mansion block in Mansfield Road, close to Oxford Street, where Abdulmutallab used to live in the capital
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