This is second time in four years that Obama has been named person of the year by the publication.
He had received the title in 2008.
Coming closely behind Obama is young Pakistani education activist Malala Yousafzai, who is recuperating in a British hospital after being shot by the Taliban in October in Pakistan for speaking out about girls' right to education.
Apple CEO Tim Cook is also among those shortlisted by the publication for its annual honour while Egypt's first democratically elected President Mohammad Mursi also founf a place among the runners up.