Archbishop Tutu made the call in a letter to G8 leaders meeting in Italy this week signed also by the former Irish President Mary Robinson and Bangladeshi Nobel Peace Prize winner Muhammad Yunus.
They are asking G8 leaders to agree to a new Global Fund for Education (GFE) that to provide education for all.
They point to the plight of 75 million children around the world who are unable to attend school as well as the world's 770 million illiterate adults.
"Education is the key to unlocking inter-generational deprivation, as it offers the knowledge people need to live healthy, happy lives," the letter states.
"By investing in education, the G8 can leverage huge returns in women's and children's health, nation- and peace-building, and global economic development now and in the future," they write.
"At this critical time, millions of children are dropping out of school to join the labour market, governments are being forced to cut their education budgets and total aid commitments to basic education are dropping at an alarming rate."
Speaking to journalists, Archbishop Tutu said the GFE would set in reverse a global decline in educational aid to the poorest countries and in so doing, improve the overall health of these countries. He wants to see the GFE up and running by the end of the year.
The letter also reminds Obama of the promise he made during his presidential campaign to commit at least $2 billion to setting up a new global fund for education by 2015.
It stated: “Such a bold and ambitious plan should be endorsed by other members of the G8 through a public commitment to such an initiative, which must be launched before the end of the year with full funding."
