Obama had threatened to veto the bill because of a number of concerns. The bill covers the cost of ships, aircraft, weapons and military personnel as well as the war effort in Afghanistan.
The president said although he continued to oppose certain sections of the bill, "the need to renew critical defence and authorities and funding was too great to ignore", Xinhua reported.
The bill consists of 528 billion dollars for the Defense Department's base budget, 17 billion for defence and nuclear programmes in the Energy Department and 88 billion for overseas contingency operations that covers the war in Afghanistan.
It also contains controversial sections relating to the disputed Diaoyu Islands between China and Japan as well as arms sales to Taiwan.
China has expressed serious concerns and firm opposition to the two sections.