He said his administration is committed to lead. "We can no longer afford drift, and we can no longer afford delay, nor can we cede ground to those who seek destruction," he said.
On his second full day in office, Obama moved to reverse some of the most contentious policies of his predecessor, George W. Bush.
By ordering shut the prison camp at Guantanamo Bay, Cuba, closing any remaining CIA secret prisons overseas and banning harsh interrogation practices, Obama said he was signaling that the U.S. would confront global violence without sacrificing "our values and our ideals."
"First, I can say without exception or equivocation that the United States will not torture," he said. "Second, we will close the Guantanamo Bay detention camp and determine how to deal with those who have been held there."
The president and Clinton jointly announced the appointment of former Senate Majority Leader George Mitchell, a veteran troubleshooter who helped broker peace in Northern Ireland, as special envoy to the Middle East. Former U.N. Ambassador Richard Holbrooke, who helped write the peace deal that ended Bosnia's 1992-95 war, was named special envoy for Pakistan and Afghanistan.
Obama said he would aggressively seek a lasting peace between Israel and the Palestinians while also always defending Israel's "right to defend itself." He called on Israel and Hamas to take steps aimed at ensuring that the cease-fire that's in place in Gaza will endure.
And, citing a "deteriorating situation" in both Afghanistan and Pakistan, Obama said that region is now "the central front" in the battle against terrorism and extremism.
"There, as in the Middle East, we must understand that we cannot deal with our problems in isolation," he said.
Earlier, in signing a series of executive orders in the Oval Office that included closing Guantanamo, Obama said his administration would not "continue with a false choice between our safety and our ideals," a slap at policies pursued by Bush.
The much-maligned U.S. prison camp would be shut down within a year, in keeping with a frequent Obama campaign promise. The administration already has suspended trials for terrorist suspects at Guantanamo for 120 days pending a review of the military tribunals.
Congressional Democrats welcomed the moves.
"President Obama is ushering in a new era of smart, strong and principled national security policies, and Congress stands ready to work with him each step of the way," said Sen. Jay Rockefeller of West Virginia, outgoing chairman of the Intelligence Committee.
But there was skeptical questioning from GOP leaders.
House Minority Leader John Boehner, R-Ohio, said it "would be irresponsible to close this terrorist detainee facility" before "important questions" are resolved. Boehner said these include where will the detainees go when Guantanamo is closed and how will they be secured?
White House press secretary Robert Gibbs said such issues would be determined in the coming days.
"Obviously, what started today was a process," Gibbs said.
The president set up a task force that would have 30 days to recommend policies on handling terror suspects who are detained in the future and where Guantanamo detainees should be housed once it has closed.
Obama also signed an order requiring all U.S. personnel to follow the U.S. Army Field Manual while interrogating detainees and told the Justice Department to review the case of Qatar native Ali al-Marri, who is the only enemy combatant currently being held in the U.S.
Separately, retired Adm. Dennis Blair, Obama's pick to oversee the nation's intelligence agencies, told a Senate confirmation hearing that the manual would no longer be called the Army Field Manual but would be renamed "the manual for government interrogations."
Blair told the Senate Intelligence Committee the manual also will be reviewed for possible changes. It now outlines 19 legal techniques and forbids nine.
Blair said he hoped to rebuild trust in the nation's intelligence agencies. These agencies "must respect the privacy and civil liberties of the American people, and they must adhere to the rule of law," he said. As director of national intelligence, Blair will oversee the CIA, National Security Agency and other assorted intelligence units.
U.S. foreign policy in the new administration will be overseen by four former senators - Obama and Clinton and Vice President Joe Biden, who served together until after this year's election, and Mitchell, who served much earlier as Senate majority leader.
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AP White House Correspondent Jennifer Loven contributed to this report.
