"Today, as I suspend my campaign, I congratulate him," Clinton told about 2,000 cheering supporters at the National Building Museum in Washington. Her husband, former President Bill Clinton, and her daughter, Chelsea, stood to the side of the stage.
"I endorse him and I throw my full support behind him," she said of Obama. Clinton, a New York senator and former first lady who was once considered a heavy favourite to become the first female US president, had resisted calls to pull out of the race for months as Obama built an unassailable lead.
Obama will be crowned the Democratic nominee at the party's August nominating convention and will face Republican Senator John McCain in November's election to choose a successor to President George W. Bush. The Illinois senator will be the first black presidential nominee of a major US political party.
Obama did not appear at the rally, giving Clinton the spotlight for the day. Clinton won more than 17 million votes during the Democratic nominating battle, and Obama has tried to build bridges to her camp ahead of the November campaign. The possibility she will be Obama's running mate has sparked endless speculation in political circles. She says she is open to the idea, a prospect that excites many supporters, but is viewed with scepticism in Obama's camp.
Some of her supporters have tried to pressure Obama into picking her, but her campaign issued a statement on Thursday saying she is not seeking the vice presidential slot. Obama has named a three-member team to head his vice presidential search and has sworn off further discussion of the choice.