The new bill bars Guatanamo suspects from being brought to the United States for trial.
Despite having earlier promised to close the prison which was condemned internationally for severe mistreatment of prisoners, Obama claimed he was forced but defended his actions saying the bill was vital for funding the countryâ€™s foreign wars in 2011.
The US President also voiced his opposition without explicitly threatening the restrictions.
The Guatanamo detention facility was established in 2002 by the Bush administration and almost 800 detainees have been brought to the camp since October 2001 when Washington began the war of Afghanistan.
A total of 1 100 US Army and navy troops guard the prisoners in nine separate camps at Guatanamo.
International Red Cross inspectors and released detainees have reported acts of sleep deprivation, abuse of religion, beatings and confinement in small and cold cell among other acts of torture.