The plan comes amid growing consumer concern about their lack of control over the collection and trade in vast amounts of detailed information about their online activities and real-life identities.
As part of the announcement, a coalition of online advertisers said its members would honor "Do not track" requests through tools in Google, Microsoft Corp and Firefox browsers, something the Federal Trade Commission has been advocating since 2010.
But privacy advocates said that commitment was of limited scope and consumers should avoid thinking their Internet activity would be totally shielded.
Various federal agencies, including the FTC and Department of Commerce, have recommended similar privacy rights in the past, but broad legislation has failed to get traction. Privacy laws have been narrowly tailored toward protecting children, or categories of data such as credit reports and health records.
Legislators and privacy advocates said they hoped the White House call for talks with Internet companies, consumer groups and other stakeholders would lead to voluntary adoption of strong protections, which would undercut industry lobbying against legislation in a divided Congress.
"The hope would be that this is a measure that you get all the large advertisers to agree to. Then it gets to be in their interest to get it enforced on the others through legislation," said Christopher Calabrese, lobbyist for the American Civil Liberties Union.
A leading Republican on the issue in the GOP-controlled House, Representative Mary Bono Mack, gave tepid support, saying she would work with the administration but that "any rush-to-judgment could have a chilling effect on our economy and potentially damage, if not cripple, online innovation."
The White House proposed seven basic protections that consumers should expect from companies.
Consumers should have control over the kind of data companies collect, companies must be transparent about data usage plans and respect the context in which it is provided and disclosed. Companies would have to ensure secure and responsible handling of the data and be accountable for strong privacy measures.
The bill of rights also calls for reasonable limits on the personal data that online companies can try to collect and retain, and the ability for consumers to correct their information.
TARGETED AD PROTECTION
The White House said an existing industry-backed system for giving consumers the ability to avoid targeted online ads, that companies can charge more for, had been strengthened.
Microsoft's Internet Explorer and Mozilla's Firefox already allow consumers to indicate that they do not want to be tracked as they surf the Web, but advertisers can ignore those requests. Google said on Thursday that it would add a "Do not track" button to its Chrome browser.
The Digital Advertising Alliance, a self-regulatory body representing media and marketing trade associations said its members would honor consumer requests and it would work with browser companies to give consumers preference tools.
Stu Ingis, the group's general counsel, said he expected within nine months for browsers to include a simple, clear mechanism for consumers to opt-out of data collection.
That opt-out would not end tracking, privacy advocates said.
"It's a bogus sham," said John M. Simpson, privacy director at Consumer Watchdog. "All it does is that advertisers stop serving you targeted ads, but they continue to track. It doesn't go far enough."
Consumers might still receive ads aimed at small groups of people, said Fred Cate, an Indiana University professor and former FTC adviser. And companies would be free to use what they know about individuals for market research and to tailor their products.
Obama's announcement comes as he hones his strategy for winning re-election in November.
"American consumers can't wait any longer for clear rules of the road that ensure their personal information is safe online," President Barack Obama said in a statement.
"As the Internet evolves, consumer trust is essential for the continued growth of the digital economy. That's why an online privacy Bill of Rights is so important."
WORKING WITH INDUSTRY
The Commerce Department now will work with companies and privacy advocates to develop "enforceable" privacy policies based on the bill of rights, said the White House.
FTC Chairman Jon Leibowitz said a failure to meet privacy commitments, once adopted, could be a deceptive act or practice, warranting FTC fines or other action.
Internet companies have tried to get ahead of reforms by adopting privacy policies, but have still come under fire from Congress and consumer groups.
In the latest flare-up, a group of 36 state attorneys general sent a letter to Google on Wednesday with concerns about the search giant's plans to begin sharing users' personal information across Google products on March 1 without giving consumers an opt-in option.
"It rings hollow to call their ability to exit the Google products ecosystem a 'choice' in an Internet economy where the clear majority of all Internet users use - and frequently rely on - at least one Google product on a regular basis," the National Association of Attorneys General said in the letter.
Google said it viewed targeted ads and other Internet features that allow users to personalize their Web experience as a good thing. But consumers need choice through product controls that are easy to use, the company's senior vice president of advertising Susan Wojcicki said in a blog post.
Facebook's chief privacy officer-policy, Erin Egan, said the social networking site looked forward to helping develop enforceable codes of conduct that would balance "the public's demand for new ways to interact and share."
Marc Rotenberg, executive director of the Electronic Privacy Information Center, called Obama's privacy rights statement "the clearest articulation of the right to privacy by a U.S. president in history.
"But there are real concerns about implementation and enforcement," he added.
(Reporting By Jasmin Melvin in Washington D.C. and Joseph Menn in San Francisco.; Additional reporting by Diane Bartz and Gerry Shih; Editing by Michael Perry and Tim Dobbyn)