India and the United States have broken an impasse standing in the way of civil nuclear trade, Indian media reports.
The breakthrough comes as Obama and Indian Prime Minister Narendra Modi met in New Delhi.
The reports said that the pair had ironed out differences on the liability of suppliers to India in the event of a nuclear accident and the United States had dropped its demand to be able to track the whereabouts of nuclear material supplied to India.
US President Obama was given an elaborate welcome at the country's presidential palace in New Delhi.
He walked in his socks to place a commemorative wreath honouring the father of India's independence movement, Mahatma Gandhi.
Tomorrow, Mr Obama was to be the guest of honour at India's Republic Day festivities, making him the first US president to attend the anniversary of the enactment of country's democratic constitution.
Barack Obama has arrived in India with his wife Michelle for a symbolic three-day visit of the country.
In a break from protocol, the US President and the First Lady were met on the tarmac by Prime Minister Narendra Modi.
The two leaders hugged warmly before the group posed for photographs.
Just a year ago, relations between the two countries were at an all-time low when a diplomatic row broke out over allegations an Indian diplomat in the US exploited her housekeeper - leading to the abrupt resignation of the US ambassador from India.
Obama will be the first US president to attend India's Republic Day parade and will host a radio show with Mr Modi.
"I'd like to think the stars are aligned to finally realise the vision (of) India and America as true global partners," Obama said in an interview with India Today, a weekly magazine, published on Friday.
Pakistan's Prime Minister has accepted an invitation to the inauguration of his new Indian counterpart, Narendra Modi.
Nawaz Sharif's appearance will be the first time a Pakistani leader has attended an Indian Prime Minister's inauguration.
The two nations have fought three wars since becoming independent from the British Empire in 1947, while tensions have often surfaced over the disputed Kashmir region.
India's incoming Prime Minister Narendra Modi paid a visit to his 95-year-old mother as early election results showed his BJP party was heading for a landslide victory in the country's general election.
Mr Modi can be seen touching mother Hiraben's feet before she places a hand on his head as a sign of blessing and applies a special pigment known as Sindoor to his forehead.
David Cameron has offered his congratulations to India's incoming Prime Minister, the BJP party's Narendra Modi.
Results so far indicate a landslide victory for Mr Modi's party over Manmohan Singh's Congress Party.