U.S. President Barack Obama (C), flanked by Vice President Joe Biden (L) and House Speaker John Boehner (R-OH), delivers his State of the Union speech on Capitol Hill in Washington.

Washington - President Barack Obama on Tuesday wagered his second term on an ambitious bid to strengthen America at home by reigniting its economic engine, cutting gun murders and fixing immigration.

Focusing his State of the Union address squarely on domestic priorities, Obama dealt in passing with churning foreign policy crises, including North Korea's new nuclear test and Iran's unsolved nuclear brinkmanship.

And as he ends an era of draining land wars abroad, Obama announced plans to halve US troop numbers in Afghanistan within a year, though vowed the global pursuit of terror suspects would go on.

Praising American steadfastness during testing economic times, Obama grasped for a note of optimism, while vowing to restore the middle class.

“Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger,” Obama said, in a speech punctuated by 68 ovations, delivered from the House of Representatives.

The address, before a huge national audience, was Obama's best chance to sell his second term plans in a bitterly divided nation and to stave off the domestic lame duck status all second term presidents dread.

Divided Washington must fix its gaping budget deficit, Obama said, describing billions of dollars in automatic spending cuts due to crash into the economy on March 1 as “a really bad idea”.

He slammed Republican ideas to adjust retirement benefits and health care for seniors as “even worse”.

“A growing economy that creates good, middle-class jobs - that must be the North Star that guides our efforts,” Obama said, seeking to turn promises of a more equitable economy made in his election campaign into reality.

Obama's message was unapologetically tailored to a domestic American audience, as he insisted that government investment must bankroll jobs growth.

“He will be about revitalising the middle class and (easing) a sense of insecurity that has swept through much of the nation,” said Princeton University professor Julian Zelizer.

But Republicans wasted no time in trying to thwart Obama's plans.

“President Obama? He believes… that the economic downturn happened because our government didn't tax enough, spend enough and control enough,” said rising star Senator Marco Rubio, giving the Republican rebuttal speech.

“As you heard tonight, his solution to virtually every problem we face is for Washington to tax more, borrow more and spend more.”

Obama was at his most passionate when making the case for measures to stem gun violence, following the killings of 20 kids at a Connecticut elementary school in December.

“If you want to vote no, that's your choice,” he cried, drawing lawmakers to their feet in an emotional tribute to victims of gun crime. “These proposals deserve a vote.”

Looking on in the House gallery with First Lady Michelle Obama were the parents of Hadiya Pendleton, a teenager shot in a random shooting not far from the president's Chicago home days after she took part in his inaugural parade.

Obama also announced the return of 34 000 of the 66 000 US troops remaining in Afghanistan by next February, ahead of a full withdrawal in 2014.

“This drawdown will continue. And by the end of next year, our war in Afghanistan will be over,” he said.

In a brief diversion abroad, Obama said North Korea's nuclear test on Tuesday would only further its isolation, and promised to stand by Asian allies, strengthen missile defence and lead the world in a firm response.

Obama said “Iran must recognise that now is the time for a diplomatic solution” to a nuclear showdown, ahead of new talks with world powers this month.

Arguing Al-Qaeda was a “shadow” of its former self, Obama pledged to help nations like Yemen, Libya, and Somalia provide for their own security, and help allies like France fighting extremists in Mali.

Breaking new ground, Obama announced the start of formal talks between the United States and the European Union on a trans-Atlantic trade pact and previewed a new plan to thwart cyber attacks on US infrastructure.

Despite criticism he ignored the slaughter of nearly 70 000 people in Syria, Obama vowed to keep up pressure on Bashar al-Assad's regime and said he would stand firm in defence of Israel, which he will visit next month.

He tried to shame Congress into action on climate change.

“We can choose to believe in the overwhelming judgment of science - and act before it's too late,” Obama said.

In line with a long-time policy goal, Obama said former Cold War foes Russia and the United States should join to further reduce nuclear arsenals.

Domestically, Obama said he wanted a bill to reform the broken immigration system to give illegal immigrants a path to citizenship within months.

Hitting campaign mode, Obama will travel to North Carolina, Georgia and his hometown of Chicago to sell his speech this week. - AFP