Many workers being forced to take unpaid leave
The president's self-imposed pay cut would be effective from March 1, when the spending cuts began, and would last through the end of December, according to an administration official.
Obama earns US$400,000 per year. The official said the president decided on the five per cent reduction, which would total US$20,000, because it would be similar to the level of cuts to non-defense government agencies.
Defense and non-defense discretionary spending has shrunk across the board as a result of reductions under a process known as sequestration. To maintain critical functions, many agencies are making workers take unpaid leave, or furloughs.
"The president has decided that to share in the sacrifice being made by public servants across the federal government that are affected by the sequester, he will contribute a portion of his salary back to the treasury," White House spokesman Jay Carney told reporters travelling with the president in Colorado and California.
The president's gesture comes after the top Defense Department official said he would return part of his salary in an amount equal to pay lost by civilian employees.
Defense Secretary Chuck Hagel will give back the equivalent of 14 days worth of pay to the government, about US$10,750, his spokesman said.
Obama's decision was first reported by the New York Times.
Sequestration was originally designed as an outcome so harsh that budget negotiators would find another way to narrow trillion-dollar deficits.
However, Obama would not back away from his insistence that any spending cuts be paid for in part by higher tax revenues, while Republicans, who had conceded higher tax rates on the rich in a budget deal in January, refused to agree to any tax hikes.
The US$85 billion in overall cuts went into effect after the two sides reached impasse.