Barack Obama is the first serving US leader to visit Ethiopia.
The president is due to hold talks with government officials and to discuss the civil war in South Sudan with regional leaders.
Barack Obama will also be the first US president to address the 54-member African Union at its headquarters in Addis Ababa on July 28.
He flew to Ethiopia after a two-day visit to Kenya.
There he had discussed trade and security but also called for greater human rights and warned of the dangers of corruption.
Barack Obama was greeted at Addis Ababa’s international airport by Ethiopian PM Hailemariam Desalegn.
On July 27, Barack Obama is due to discuss ways to bring South Sudan’s 19-month-old civil war to an end.
In talks with leaders from Ethiopia, Kenya and Uganda as well as the Sudanese foreign minister, he is expected to call for tougher sanctions and a possible arms embargo if the warring factions do not agree on a peace deal.
However, a US official travelling with Barack Obama said today’s talks were not expected to lead to a breakthrough.
“This is an opportunity to reinforce the effort that’s on the table and to strategize… on next steps in the event that it doesn’t succeed,” the official told reporters.
Fighting in South Sudan has left thousands of people dead and displaced more than two million.
Security issues will also be on Barack Obama’s agenda as Ethiopia, like Kenya, is battling the jihadist group al-Shabab.
Correspondents say he is also likely to call for greater democracy and human rights while in Ethiopia.
Ethiopia’s ruling party, the EPRDF, and its allies won every single parliamentary seat in May’s elections. Opposition parties claimed the process was rigged.
Some rights groups have criticized Barack Obama’s visit to Ethiopia, warning that the trip could lend credibility to a government accused of jailing journalists and critics.
Amnesty International’s Abdullahi Halakhe said: “We don’t want this visit to be used to sanitize an administration that has been known to violate human rights.”
Human Rights Watch and other organizations urged Barack Obama to put the “pressing human rights concerns… at the forefront of your discussions”.
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