Outgoing US President Barack Obama returned to his home town of Chicago to cement his legacy in a soaring farewell speech, listing a string of achievements from repairing the economy to legalising same-sex marriage to extending health insurance to millions during his eight years in office.

It was a defiant but statesman-like address by Mr Obama, who will hand over to his successor Donald Trump on Jan 20.

Entering and exiting the hall to rousing music from his 2008 campaign, he ended his speech by updating his original campaign slogan "Yes we can" to "Yes we did", drawing prolonged applause from the capacity crowd of thousands.

Mr Obama also warned of threats to US democracy from internal divisions and inequality. Talk when he came to power of a post-racial America, however well intended, was never realistic for "race remains a potent and often divisive force in our society", he said.

Yet his overarching message at the packed lakeside convention centre, where he had spoken on his re-election in 2012, was one of optimism and faith.

Calling for unity and empathy, he invoked the spirit of America's founding fathers and the pioneering spirit of generations of immigrants, and urged Americans to participate more in the democratic process.

"Our democracy is threatened whenever we take it for granted," he said to the audience, many of whom had queued for hours to be there. "All of us should be throwing ourselves into the task of rebuilding our Democratic institutions."

Speaking to reporters ahead of the speech, White House spokesman Jen Psaki said it would be a "passing of the baton" to a new generation of leaders. Ms Psaki and senior adviser Valerie Jarrett briefed reporters in the White House. "His intention is to motivate people to want to get involved and fight for their democracy," Ms Jarrett said.

Professor Glenn Altschuler of Cornell University told The Straits Times in a phone interview: "His speech was optimistic at a time when people are apprehensive. He understands he is fighting for his legacy. President Obama knows that in the next few years, there will be a concerted effort to roll back his achievements in almost every area, and he is both trying to prevent that from happening and also drawing a contrast with his successor. It was a legacy speech as much in terms of his own temperament and character as President."

Indeed, Mr Obama has had to defend policies - such as the Affordable Care Act, or Obamacare - which are expected to come under assault by the next administration. In an interview published in USA Today on Monday, Trump senior adviser Kellyanne Conway said Mr Obama "knows that a great deal of what he did is not going to survive this next presidency, or maybe even this next month, in some cases".

The setting for the speech was not typical; most presidential farewell addresses have been given at the White House. Presidential historian Douglas Brinkley was quoted by The Washington Post as calling it "the most highly publicised farewell address in American history".

The President teared up - and reduced many in the audience to tears - when he mentioned his wife, First Lady Michelle Obama, and their daughters.

Mr John Weaver, a political consultant and Republican Party strategist, tweeted after the speech: "Didn't agree with the President on everything, but know he loves America, treated this democracy gently and conducted himself with honour."

In closing, Mr Obama said it had been the honour of his life to serve Americans, and he would not stop. "In fact, I will be right there with you, as a citizen, for all my days that remain," he said.

US presidents do not normally stay politically active after their terms, and, despite his high popularity ratings, there was little indication he was contemplating remaining a political force.

Earlier in the speech, Mr Obama said: "In 10 days, the world will witness a hallmark of our democracy" - and when a chorus of boos went up, he cut them off, emphasising "the peaceful transfer of power from one freely elected president to the next".

The boos turned to cheers as he said: "I committed to President-elect Trump that my administration would ensure the smoothest possible transition, just as President Bush did for me."