By Yolande Knell
BBC News, Cairo
Mr Obama's speech had been eagerly anticipated
The choice of venue was rich in symbolism for President Barack Obama to make his speech seeking "a new beginning between the United States and Muslims."
Cairo University saw heated anti-American protests during the Iraq war in 2003 as US relations with the Islamic world deteriorated.
But on Thursday students excitedly welcomed their visitor.
"It's a historic day," said Maya Muhammed, 21. "He's trying to solve the problems between Americans and Muslims."
"That's what we really hope for."
Most of those invited to listen to the president's wide-ranging speech in the university's domed hall were complimentary.
His frequent quotes from the Koran won loud applause.
But some expressed disappointment that they had not heard new policies, particularly on the Israeli-Palestinian conflict.
"He didn't talk about Israel very well," remarked Samir Fanouz. "I felt he could have elaborated on what he wanted to do."
Before the speech, Arab officials stressed that the Palestinian question remains at the heart of problems which fester in the Middle East.
"It is really a sore point that has gone on for far too long and it needs to be addressed in an efficient, decisive way," said Hossam Zaki, Egypt's foreign ministry spokesman.
Egypt was chosen for the speech because of its go-between role
"If President Obama presents a detailed outline of his vision to end this conflict it will be a relief for much of the Arab and Muslim world."
However, in Cairo Mr Obama made few demands that he had not articulated before. He stressed the need for a Palestinian state and said continued Israeli settlement in the West Bank was not legitimate.
He added that Arab nations had responsibilities, and repeated that they needed to recognise Israel.
Giving his reaction, the Secretary General of the Arab League, Amr Musa, commended the "balanced" approach. He stressed that consultations with the US on Middle East peace were continuing.
The White House's decision to arrange this keynote speech in Egypt was seen, in part, as a reward for its efforts acting as a go-between for Israel and the Palestinians.
It has tried to seal a long-term ceasefire between Israel and Hamas in Gaza and is hosting Palestinian reconciliation talks.
It also fitted the bill as a major Muslim power and the most populous country in the Arab world.
However, Mr Obama had to tread carefully when speaking on democracy and human rights.
Souvenir sellers in Cairo have cashed in on Mr Obama's visit
President Hosni Mubarak, a staunch US ally, has ruled for nearly 30 years.
The main opposition group, the Muslim Brotherhood, is officially banned and its members are often arrested. Yet its MPs - who stood in elections as independents - control one-fifth of parliamentary seats.
Muhammad Al-Qatatni, head of the parliamentary bloc, was invited to Obama's speech but was not surprised that the Islamist movement was not mentioned.
"I don't think it would have been diplomatic and appropriate for President Obama to speak about an organisation that the Egyptian regime considers to be banned," he said.
Recent opinion polls suggest that Egyptians view President Obama more favourably than his predecessor but continue to see US foreign policy in a bad light.
In research by WorldPublicOpinion.org, 67% said that America played a negative role in the world.
It remains to be seen whether President Obama has changed that.
Certainly he already has the endorsement of souvenir sellers in Cairo's ancient Khan El-Khalili bazaar.
They have started selling T-shirts which raise him to the level of ancient Egyptian royalty.
"Obama" they read, "the new Tutankhamun of the World."