Obama has ordered two urgent reviews, which he said began on Sunday, examining airport security procedures and the US system of watch lists.
He said there were several points at which red flags should have been raised to prevent 23-year-old Umar Farouk Abdulmutallab from smuggling explosives onto a plane to the US.
In the immediate aftermath of the attempted attack it emerged that Abdulmutallab's father, a prominent Nigerian banker, had alerted US authorities about his son.
As a result, his name was added to one advisory list but was not put on the more restrictive so-called "no fly" list.
On top of that, airport screening equipment did not detect the explosives Abdulmutallab allegedly carried on board the Northwest Airlines flight carrying nearly 300 people.
Al Jazeera talks to a former CIA agent about the growing threat facing air travel
"When our government has information on a known extremist and that information is not shared and acted upon as it should have been… a systemic failure has occurred and I consider that totally unacceptable," Obama said.
Obama's comments follow widely-criticised remarks at the weekend from Janet Napolitano, his homeland security chief, who said that the attempted attack showed the aviation security system worked.
She has since contended that her remarks were taken out of context and that the response system had worked after the attacker was subdued.
Abdulmutallab is currently being questioned by US investigators and has reportedly told them he received his training and explosives in Yemen.
A group calling itself "Al Qaeda in the Arabian Peninsula" said in an online statement that it had planned the attack.
Following that claim Yemen's foreign minister said he believed there could be up to 300 al-Qaeda fighters within the country.
Speaking to the BBC Abu Bakr Al-Qirbi called for more help from the West to train Yemeni security forces, warning that further attacks could be in the planning stages.
"Of course there are a number of al-Qaeda operatives in Yemen and some of their leaders. We realise this danger," he said.
"They may actually plan for attacks like the one we have just had in Detroit," he said.
Al-Qirbi said it was important for countries to improve their intelligence sharing with Yemen, so that authorities there could be alerted to the movement of suspects.
"We have to work in a very joint fashion in partnership to combat terrorism," he said. "If we do that, the problem will be under control."
Meanwhile, the alleged Yemeni roots of Friday's attempted airliner attack could also complicate Obama's efforts to empty the Guantanamo Bay detention centre, where nearly half the remaining detainees are from Yemen.
|Nearly half the remaining detainees at Guantanamo are from Yemen [GALLO/GETTY]
Finding a home for those remaining detainees is key to the US administration's pledge to close the camp.
But critics of the plan are likely to seize upon the airliner plot to highlight concerns about Yemen's capacity to contain and counter a growing al-Qaeda safe haven within its border.
Al-Qaeda in the Arabian Peninsula counts two former Guantanamo detainees among its leaders, and some in the US Congress have warned against sending any more detainees to Yemen.
Speaking to the The Associated Press news agency, David Remes, a lawyer who represents Guantanamo detainees, said he feared those concerns could block the repatriation of any inmates to Yemen, including those already cleared for release.
"In theory, what's going on in Yemen should have nothing to do with whether these men are transferred," he said.
"The politics of the situation may turn out to be prohibitive, at least in the short run, and that would be a tragedy."