He said: "Chelsea Manning has served a tough prison sentence so the notion that the average person who was thinking about disclosing classified information would go unpunished, i don’t think would get that impression."
Manning gave classified information of more than 700,000 documents, videos, diplomatic cables and battlefield accounts to anti-secrecy group WikiLeaks in 2010, in what is considered to be the biggest security breach in US history.
President Obama gave his final speech today
President Obama said she "served a tough prison sentence", adding that "the sentence was very disproportionate given what other leakers have received".
He claimed "it make sense to commute and not pardon her sentence", adding he felt "very comfortable that justice has been served that the message has been sent."
Obama's final press conference came two days before Trump's inauguration
But he also refused to confirm whether or not Wikileaks founded Julian Assange would be extradited to the US.
The President said the commutation was done without regard to WikiLeaks founder Julian Assange, who said on Twitter last Thursday that if Manning was freed, he would accept extradition to the United States, where there is an open criminal investigation into the activities of WikiLeaks.
But Obama said he "does not follow" Mr Assange's tweets and "does not comment on Wikileaks generally", referring reporters to the US Justice Dept for any criminal investigations that could "come up in relation to him".
President Obama would not confirm if Assange would be extradited
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U.S. President Barack Obama and First Lady Michelle Obama serve Thanksgiving dinner to residents of AFRH in Washington
The comments come during President Obama’s final press conference of his term, speaking just two days before welcoming Donald Trump to the White House.
After Friday’s inauguration, Obama is scheduled to vacation in Palm Springs with First Lady Michelle Obama.
And he thanked reporters at the conference who have covered his tenure in the White House.
Barack Obama said he would attend Trump's inaugeration
He said: "Having you in this building makes this place work better".
“Where our interests have overlapped we have worked together.”
But he claimed an “anti-american rhetoric” emerged after Putin’s return to Presidency, claiming relations returned to a Cold War level.
The President added sanctions were issued to Russia because of the state’s actions in Crimea, saying "it is important for the US to stand up for the basic principle that big countries don't go around invading small countries".
He added: “What I’ve said to the Russians is as soon as you stop doing that, the sanctions will be removed.
“And I think it would probably best serve not only American interests but also the interests of preserving international norms if we made sure that we don’t confuse why these sanctions have been imposed with a whole set of other issues.”
Obama also said his talks with Trump had so far been cordial and lengthy, but conceded there is unlikely to be an overlap in their policies.
President Obama says he is looking forward to spending time being quiet
He revealed he will attend Trump's inauguration on Friday with his wife Michelle, saying he hopes it is warmer than his inauguration.
But he refused to comment on Democrats who say they will not attend the event, saying: "I'm not going to comment on those issues.
"All I know is that I'm going to be there and so is Michelle."
It is the 165th time Obama has faced the White House press corps in this kind of forum, according to the American Presidency Project.
But Barack Obama, the first African-American president, is thought to be 45 pressers behind his predecessor George W. Bush – who held 210 press conferences during his two terms.
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The White House Christmas Tree in the Blue Room of the White House in Washington, DC, November 29, 2016.
He will be leaving the White House with a high approval rating, after separate polls conducted by The Washington Post/ABC and CNN/ORC both found Mr Obama had a 60 per cent rating.
He says he is now looking forwards to spending some time "beig quiet" and plans to take up writing.
But he added a list of things that would get him back in the political arena – including discrimination, obstacles to being being able to vote and efforts to silence the press.