The selection was announced Wednesday on NBC's "Today" show.
The short list for the honour included Malala Yousafzai, the Pakistani teenager who was shot in the head for advocating for girls' education.
It also included Egyptian president Mohamed Morsi and Bill and Hillary Clinton.
Obama also received the honour in 2008, when he was President-elect.
Last year, "The Protester" got the honour.
Time's "Person of the Year" is the person or thing that has most influenced the culture and the news during the past year for good or for ill. In 2010, Facebook founder and CEO Mark Zuckerberg received the honour.
Other previous winners have included Federal Reserve Chairman Ben Bernanke, Bono and President George W. Bush.
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