In a statement at the White House, Obama called it an "equitable solution." Under the compromise, religious-affiliated employers will not be required to provide birth control coverage.
That covers Catholic hospitals and Catholic universities, among others.
The burden falls to insurance companies to offer birth control services at such institutions, free of charge.
Churches are exempt from the rule.
The policy on contraception stems from the 2010 healthcare overhaul.
When the original rule was unveiled -- requiring employers to provide full birth control services to women -- it provoked immediate criticism from Republicans and some Catholic Democrats.
The harshest critics accused the administration of waging war on religion.
President Obama said he cherishes religious liberty.