He is due to visit a memorial to the 1998 US embassy bombing, before talks on security with Kenya`s president.
His first visit as president to his father`s homeland began on Friday.
The trip has been described as a "homecoming" by Kenyan media, and crowds cheered Mr Obama`s motorcade as it travelled from the airport.
In Nairobi on Saturday morning, the US president presided over the opening of a Global Entrepreneurship Summit.
He was then scheduled to visit the memorial park on the site of the US embassy attack.
More than 200 people, including 12 Americans and 34 local embassy staff, died in the blast which was blamed on al-Qaeda.
A simultaneous attack on the US embassy in Dar es Salaam, Tanzania, killed 11 people and wounded 70.
Later, Mr Obama is expected to hold bilateral talks with Kenyan President Uhuru Kenyatta.
BBC East Africa correspondent Karen Allen says it is security and Kenya`s counter-terrorism efforts that are likely to dominate the talks.
Kenya has been targeted by the militant Somalia-based Islamist group al-Shabab which killed at least 67 people in an attack on Nairobi`s Westgate shopping complex in 2013.
The group also staged an attack on the university in Garissa, northern Kenya, earlier this year in which 148 people died.
Although trade and security are featuring strongly in Mr Obama`s visit, he has also pledged to deliver a "blunt message" to African leaders about gay rights and discrimination.
Security is tight for Mr Obama`s visit with about 10,000 police officers deployed in Nairobi, major roads closed and US military planes patrolling overhead.
On his arrival at Kenyatta International Airport in Nairobi, he was hugged by his half-sister Auma and later, at dinner, the president was joined by more relatives including "Mama Sarah", who helped to raise his late father.
Our correspondent says Mr Obama`s visit would have been diplomatically impossible three years ago when President Kenyatta faced charges at the International Criminal Court in The Hague.
The case against Mr Kenyatta has since been dropped and the way seems clear for a restoration of ties, she adds.
After his visit to Kenya, Mr Obama will travel on to Ethiopia where he will become the first US leader to address the African Union.
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