The two nations will sign the new treaty on April 8 in Prague, where Obama gave a major speech last April calling for a world free of nuclear weapons.
The deal replaces the 1991 Start agreement which expired in December.
Obama said he was looking forward to working closely with his fellow Democrats and Republicans in Congress to ratify the new treaty.
Some analysts have said Republicans who staunchly back missile defence may try to deny the Obama administration the two-thirds majority it needs in the Senate to pass the treaty.
Robert Gates, the US defence secreatry, said the new treaty did not set constraints on US plans to develop and improve missile defence systems.
Patty Culhane, Al Jazeera's correspondent in Washington, said: "This is probably the first concrete success that President Obama can point to to when it comes to foreign policy.
"This has been a very tough negotiation, it's been going on for more than a year and the announcement is more than three months late."
Neave Barker, Al Jazeera's correspondent in Moscow, said that Medvedev had announced that "the agreement showed a balance of interests between the two countries".
Sergei Lavrov, the Russian foreign minister, said the treaty had made a "significant contribution ... to strengthening the regime of nuclear non-proliferation".
He said the treaty would "also increase the level of trust not only between Russia and the United States but more generally between nuclear and non-nuclear ... members of the Non-Proliferation Treaty".
Under the terms of the treaty the two countries will reduce their number of warheads to 1,550 each.
The US has said it currently has about 2,200 nuclear warheads, while Russia is believed to have about 3,000.
Moscow and Washington have held months of difficult negotiations in Geneva aimed at replacing the treaty, a cornerstone of Cold War-era strategic arms control.
Lavrov said: "I'd also like to note the unprecedented personal involvement of presidents Obama and Medvedev in agreeing on the new treaty.
"They regularly discussed the situation in talks and developed a common understanding, which allowed delegations in Geneva to find solutions on the most complex issues."
The 1991 Start agreement led to huge reductions in the Russian and US nuclear arsenals and imposed verification measures to build trust between the two former Cold War foes.
Delays in the Start talks and missed deadlines have cast a shadow over the Russian and US leaders' efforts to make good on their pledge to improve bilateral ties.
The US is set to host a nuclear security summit on April 12 to 13, and observers had said it had been a matter of pride for Washington to have the new treaty in place before the summit.
A review conference for the Nuclear Non-Proliferation Treaty is scheduled for May.