Mr Obama issued the executive order weeks after meeting Myanmar's de facto leader, Aung San Suu Kyi.
Myanmar's access to trade benefits for poorer nations was suspended in 1989 over human rights abuses.
But the White House said substantial advances to promote democracy meant that it was no longer a threat to America's national security.
Correspondents say the move is designed to coax the rapidly transforming South East Asian country from decades of economic isolation as Ms Suu Kyi's government manages the difficult transition to democracy in Myanmar, also known as Burma.
"While Burma faces significant challenges, including the consolidation of its democracy, the United States can, and intends to, use other means to support the government and people of Burma in their efforts to address these challenges," Mr Obama wrote in a letter to the US House and Senate speakers.
However, while many companies will now enjoy lower tariffs, there are some sanctions which remain in place.
A "blacklist" of at least 100 companies and individuals with links to the former military junta has been scrapped, although a few individuals will remain sanctioned.
Myanmar was run by an oppressive military junta from 1962 to 2011.
Ms Suu Kyi, who as opposition leader was kept under house arrest for 15 years, led her National League for Democracy party to victory in Myanmar's first openly contested election for decades in November 2015.
President Barack Obama has formally eased long-standing sanctions on Myanmar.