Russian President Vladimir Putin has refused to expel American diplomats in retaliation against Obama's deportation of 35 suspected spies on US soil.
Putin said he would not engage in tit-for-tat adding he would not "stoop" to Obama's "irresponsible diplomacy". He said he would try to restore links to America under President-elect Donald Trump's leadership after the Russian foreign ministry formally recommended he expel US diplomats.
Obama's shock move, taken during the last days of his presidency, marks a new post-Cold War low in US-Russian ties and set up a potential flashpoint between incoming President-elect Donald Trump and fellow Republicans in Congress over how to deal with Moscow.
Obama, a Democrat, had promised consequences after US intelligence officials blamed Russia for hacks intended to influence the 2016 election. Officials pointed the finger directly at Russian President Vladimir Putin for personally directing the efforts and primarily targeting Democrats, who put pressure on Obama to respond.
"These actions follow repeated private and public warnings that we have issued to the Russian government, and are a necessary and appropriate response to efforts to harm US interests in violation of established international norms of behavior," Obama said in a statement from Hawaii, where he is on vacation.
"All Americans should be alarmed by Russia's actions," he said.
It was not clear whether Trump, who has repeatedly praised Putin and nominated people seen as friendly toward Moscow to senior administration posts, would seek to roll back the measures once he takes office on January 20.
Trump has brushed aside allegations from the CIA and other intelligence agencies that Russia was behind the cyber attacks. He said on Thursday he would meet with intelligence officials soon.
"It's time for our country to move on to bigger and better things," Trump said in a statement.
"Nevertheless, in the interest of our country and its great people, I will meet with leaders of the intelligence community next week in order to be updated on the facts of this situation," he said, without mentioning Russia.
The Kremlin, which denounced the sanctions as unlawful and promised "adequate" retaliation, questioned whether Trump approved of the new sanctions. Moscow denies the hacking allegations.
US intelligence agencies say Russia was behind hacks into Democratic Party organisations and operatives ahead of the November 8 presidential election. US intelligence officials say the Russian cyber attacks were aimed at helping Trump defeat Democrat Hillary Clinton.
Republican and Democratic lawmakers have voiced concern about Russia's actions, setting up a potential wall of opposition should Trump seek to overturn Obama's measures.
US House of Representatives Speaker Paul Ryan, the top Republican in Congress, said Russia "has consistently sought to undermine" US interests and called the sanctions overdue.
Republican Senators John McCain and Lindsey Graham said they intended to lead effort in Congress to "impose stronger sanctions on Russia."
Incoming White House Chief of Staff Reince Priebus told Fox News he did not condone foreign governments hacking US institutions.
"It's wrong and it's something we don't agree with," Priebus said. "However, it would be nice if we could get to a place where the intelligence community in unison can tell us what it is that has been going on and what the investigation was and what it has led to so that we can respond."
The Trump team's response could generate bipartisan discord early in the new administration's tenure.
"This is going to be a key source of tension post-inauguration," said Eric Lorber, a senior associate at the Financial Integrity Network, which advises banks on sanctions.
Obama put sanctions on two Russian intelligence agencies, the GRU and the FSB, four GRU officers and three companies that he said "provided material support to the GRU's cyber operations".
He said the State Department declared as "persona non grata" 35 Russian intelligence operatives and is closing two Russian compounds in New York and Maryland that were used by Russian personnel for "intelligence-related purposes". The State Department originally said the 35 were diplomats.
The 45-acre complex in Maryland includes a Georgian-style brick mansion, swimming pool, tennis courts and cottages for embassy staff.
A senior US official told Reuters the expulsions would come from the Russian embassy in Washington and consulate in San Francisco. The Russian embassy declined to comment.
The Russians have 72 hours to leave the United States, the official said. Access to the two compounds will be denied to all Russian officials as of noon on Friday.
The State Department has long complained that Russian security agents and traffic police have harassed US diplomats in Moscow, and US Secretary of State John Kerry has raised the issue with Putin and his foreign minister, Sergei Lavrov.
The US official declined to name the Russian diplomats who would be affected, although it is understood that Russia's ambassador to the United States, Sergei Kislyak, will not be one of those expelled.
Obama said the actions announced on Thursday were just the beginning.
"These actions are not the sum total of our response to Russia's aggressive activities. We will continue to take a variety of actions at a time and place of our choosing, some of which will not be publicised," Obama said.
A report detailing Russia's interference in the 2016 election as well as cyber attacks in previous election cycles would be delivered to Congress in the coming days, he added.
The sanctions were the strongest response yet by the Obama administration to Russia's cyber activities. However, a senior administration official acknowledged that Trump could reverse them and allow Russian intelligence officials back into the United States once he takes office. He said that would be inadvisable.
Obama amended an executive order originally issued in April 2015 to respond to cyber hacking to include sanctions on those who tamper with information to interfere with an election.
Trump said in October he would "cancel every unconstitutional executive action, memorandum and order issued by President Obama" on his first day in office, without saying who would determine their constitutionality.
Additional reporting from Reuters.