"Our clear and consistent focus has been the threat posed by Iran's ballistic missile programme and that continues to be our focus and basis of the programme that we're announcing today."
The missile defence shield had prompted severe objections from Moscow, which said it was a threat to its own nuclear deterrent.
Dmitry Medvedev, Russia's president, welcomed the US decision on Thursday, describing the move as a "responsible approach towards implementing our agreements".
"I am ready to continue the dialogue," he said, adding he would discuss missile defence with Obama at a meeting in New York next week.
Robert Gates, the US defence secretary, said Iran's long-range missile threat was not as immediate as had previously been feared.
He said Washington would deploy interceptor missiles in northern and southern Europe against more immediate threats posed by Iran's shorter range missiles, as well as place some interceptors on US ships to make the system more flexible.
Richard Weitz, the Director of the Center for Political-Military Analysis at the Hudson Insititute, said that the missile defence plan was revised as part of a general review of US military and defence strategy.
"It is a recognition by the Obama administration that the Iranian threat is a bit different than we understood [during] the Bush administration," he told Al Jazeera.
"The initial impetus for the missile defence was a concern that the Iranians were developing inter-continental ballistic missiles which could reach the United States.
"It is now clear that the Iranians are not going to have the capability in the time that was thought; they will have shorter-range systems, capable of hitting Israel and Europe. This missile defence plan is optimising to deal with that evolving threat."
Iran 'under spotlight'
But Alireza Ronaghi, Al Jazeera's correspondent in Tehran, said the US decision to alter the missile defence policy was likely to spark anger in Iran.
"I don't think anybody is very happy because Obama's words have put Iran in the focus again," he said.
Al Jazeera correspondent Nick Spicer said the move would provoke a wave of criticism from Republicans in the US.
He said: "Barack Obama is trying hard to say he is not giving up on the defence of Europe ... but he has found a quicker and cheaper way.
"The Republican opposition will see this as a sign of weakness towards Russia.
"It's the end of the love affair between East European states and the US ... since the second world war."
Former Soviet states had seen the missile plan as a symbol of US commitment to
the defence of the region 20 years after the collapse of communist rule.
Mirek Topolanek, former Czech Republic prime minister, said the US's decision was "not good news" for the country.
"This puts us in a position wherein we are not firmly anchored in terms of partnership, security and alliance, and that's a certain threat," he said.
|Robert Gates said Iran's short range missiles pose a more immediate threat [AFP]
Alan Fisher, Al Jazeera's correspondent in Warsaw, Poland, said parties on all sides would be disappointed that the defence shield is not going ahead.
"Poles will be angry at the timing of this decision - today is the 70th anniversary of the day the Russians came across the border and took control of the country.
"They think this is really just playing into the Russian's hands."
Neave Barker, Al Jazeera's correspondent in Moscow, said "arguably the Russian side has got what it wanted ... but the more comprehensive plan" announced on Thursday "may cause a new level of concern" in Russia.
Russians had raised concerns that the Bush missile system, a deterrent for Iranian long-range missiles, could be aimed at them.
But the White House said on Thursday that changes to its programmes were "not about Russia".
"This is about protecting our homeland, it's about protecting the troops that we have deployed overseas ... and it was about ensuring the defence of our allies, our European and Nato allies," Gates said.