The reforms, which also propose to eliminate the annual country caps in the employment category, are expected to benefit large number of Indian technocrats and professionals.
In a major policy speech on comprehensive immigration in Las Vegas, Obama urged the Congress to act on his proposals.
"It (immigration) keeps our workforce young, it keeps our country on the cutting edge, and it's helped build the greatest economic engine the world has ever known. After all, immigrants helped start businesses like Google and Yahoo. They created entire new industries that in turn created new jobs and new prosperity for our citizens," Obama said
The other key proposals of his "comprehensive" reform plan include "stapling" a green card to the diplomas of science, technology, engineering and mathematics (STEM), PhD and Masters Degree graduates from qualified US universities who have found employment in the country.
The President also proposed to create a startup visa for job-creating entrepreneurs.
The proposal allows foreign entrepreneurs, who attract financing or revenue from American investors and customers, to start and grow their businesses in the US, and to remain permanently if their companies grow further, create jobs for American workers, and strengthen the economy.
The proposal removes the backlog for employment-sponsored immigration by eliminating annual country caps and adding additional visas to the system.
Outdated legal immigration programs are reformed to meet current and future demands by exempting certain categories from annual visa limitations, the White House said.
Obama also proposed to eliminate existing backlogs in the family-sponsored immigration system by recapturing unused visas and temporarily increasing annual visa numbers.
The proposal also raises existing annual country caps from seven per cent to 15 per cent for the family-sponsored immigration system.
It also treats same-sex units as families by giving US citizens and lawful permanent residents the ability to seek a visa based on permanent relationship with a same-sex partner.
The proposal also revises current unlawful presence bars and provides broader discretion to waive them in cases of hardship.
"In recent years, one in four high-tech startups in America were founded by immigrants. One in 4 new small-business owners were immigrants, including right here in Nevada, folks who came here seeking opportunity and now want to share that opportunity with other Americans," Obama said.
"But we all know that today we have an immigration system that's out of date and badly broken. A system that's holding us back instead of helping us grow our economy and strengthen our middle class," he noted.
Among other things, the proposals include creating a startup visa for job-creating entrepreneurs, expand opportunities for investor visas and US economic development and create a new visa category for employees of federal national security science and technology laboratories.
Referring to the 11 million undocumented immigrants in America, of which more than 2,40,000 are from India, Obama said though they have broken the rules, but it is "impossible" to deport them.
"These 11 million men and women are now here. Many of them have been here for years. And the overwhelming majority of these individuals aren't looking for any trouble. They're contributing members of the community. They're woven into the fabric of our lives," Obama said.
He noted the change in the system was needed to strengthen country's middle class and create more opportunities.
"We have to bring this shadow economy into light so that everybody is held accountable," he said.
The reforms also aim at holding back the "brilliant" talents in the country once they complete their education at US institutions, Obama said, noting that this was not happening due to lack of a liberal immigration policy.
"We're giving them all the skills they need to figure that out, but then we're going to turn around and tell them to start that business and create those jobs in China or India or Mexico or someplace else. That's not how you grow new industries in America. That's how you give new industries to our competitors," the President said.
Obama cited examples of companies like Intel and Instagram to highlight contributions by the immigrant community towards development of US economy.
Urging the Congress to immediately act on his comprehensive immigration reform, Obama said the good news is that for the first time in many years, Republicans and Democrats seem ready to tackle this problem together.
"Members of both parties in both chambers are actively working on a solution. Yesterday a bipartisan group of senators announced their principles for comprehensive immigration reform which are very much in line with the principles I've proposed and campaigned," he said.
"My hope is that this provides some key markers to members of Congress as they craft a bill," Obama added.
White House Press Secretary Jay Carney said the president "welcomes" the proposal, saying it represents the "bipartisan support coalescing" behind certain principles of immigration reform.
Senator Chuck Schumer, D-NY, one of the eight senators, called the new proposal a "major breakthrough" and said he hopes to turn it into legislation by March -- with the goal of passing something out of the Senate "by late spring or summer."
Sen John McCain, R-Ariz, standing beside him, claimed 2013 is the "best chance" lawmakers will have to tackle immigration for years.
Even so, the proposed pathway to citizenship for illegal immigrants drew immediate criticism from others on Capitol Hill.
"No one should be surprised that individuals who have supported amnesty in the past still support amnesty," Rep Lamar Smith, R-Texas, said.
"By granting amnesty, the Senate proposal actually compounds the problem by encouraging more illegal immigration."
The eight senators who unveiled the new principles are Democrats Schumer, Dick Durbin of Illinois, Robert Menendez of New Jersey and Michael Bennet of Colorado; and Republicans McCain, Lindsey Graham of South Carolina, Rubio of Florida and Jeff Flake of Arizona.
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