The White House calls it bold action, many gay rights supporters say it is a small step.
"Many of our government's hard working, dedicated and patriotic public servants have long been denied basic rights that their colleagues enjoy for one simple reason, the people they love are of the opposite sex," Mr. Obama said.
Among the benefits, those employees can now add their domestic partner to a long-term care insurance program, they can take sick leave to care for a partner and they will receive relocation and housing allocations if they are working overseas for the state department.
But what is not included in the package is something many gay and lesbian federal employees really need -- full health benefits for their partners.
Cheryl Henley has worked for the EPA in San Francisco for nearly 20 years.
"It's very disappointing that we are not considered the same class of citizens ultimately as our co-workers, we take a financial hit and it's like unfair compensation," Henley said.
The president says he is going as far as he legally can.
Federal employee Greg Pennington agrees, but says Mr. Obama is not doing as well on gay rights as he hoped.
"Some people are willing to wait and see and have hope Obama will still deliver something, but a lot of people are getting frustrated," Pennington said.
They cite his inaction on repealing the military's "Don't Ask, Don't Tell" policy and his justice department's support of the anti-same sex Defense of Marriage Act.
Wednesday, the president said he would work to repeal the act.
"I believe it's discriminatory, I think it interferes with state's rights and we will work with Congress to overturn it," Mr. Obama said.
The president said what he did was a historic step, but admits it is just a step -- on that his critics agree.