Rival Hillary Clinton, a former first lady who entered the race 17 months ago as a heavy favorite, did not concede to Obama and said she would consult with party leaders and supporters to determine her next move.
A surge of support from uncommitted delegates helped give Obama the 2,118 votes he needed to clinch the nomination and defeat Clinton.
Obama will be crowned the Democratic nominee at the convention in August and will face Republican John McCain in November's election to choose a successor to President George W Bush.
"Tonight, we mark the end of one historic journey with the beginning of another," Obama told a cheering victory celebration in St Paul, Minnesota, at the site of the Republican convention in September.
"Tonight, I can stand before you and say that I will be the Democratic nominee for President of the United States," he said.
Obama's win over Clinton, projected by US networks, came in one of the closest and longest nomination fights in recent US political history.
Five months of voting concluded on Tuesday night with votes in Montana, won by Obama, and South Dakota, won by Clinton.
Clinton, who would have been the first woman nominee in US political history, won more than 1,900 delegates over the course of the campaign.
She told New York members of Congress she would be open to becoming Obama's vice presidential running mate, and her backers began to turn up the pressure on Obama to pick her as his No 2.
Clinton congratulated Obama after he clinched the nomination, and told a cheering crowd of supporters in New York City that she would work for party unity.
McCain held a rally in Louisiana to kick off the race against Obama. He sought to distance himself from Bush and questioned Obama's judgment and his willingness to put aside partisan interests. "He is an impressive man, who makes a great first impression," McCain said of Obama.
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