Confirming the US offered the payment in cash, Obama nevertheless downplayed the delivery's significance, saying it was not a "nefarious" deal.
And he pushed back on Republican attacks charging that the White House completed the transaction as part of the prisoner swap. The line of argument was intensified by GOP presidential nominee Donald Trump just moments before the President's comments, though he also complicated his message by referring to having seen a video of the transfer whose existence others have doubted.
Obama on Thursday sharply defended the decision to send palettes of cash to Iran, however.
"We do not pay ransom. We didn't here, and we won't in the future," Obama said after reports emerged that the United States delivered palettes of cash to Tehran on the same day the prisoners were freed.
"Those families know we have a policy that we don't pay ransom," Obama said. "And the notion that we would somehow start now, in this high-profile way, and announce it to the world, even as we're looking in the faces of other hostage families whose loved ones are being held hostage, and saying to them we don't pay ransom, defies logic."
Obama downplayed the story, saying he had been open about the payment at the time it was agreed upon.
"We announced these payments in January. Many months ago. They were not a secret," Obama said during a news conference at the Pentagon. "It wasn't a secret. We were completely open with everybody about it."
Meanwhile, Trump's decision to focus on the purported video risked diverting attention from his wider attacks on Iran policy, which have the potential to put the Obama administration and his Democratic opponent Hillary Clinton in a tough political spot.
"A tape was made -- you saw that?" Trump asked the crowd sat the start of his rally in Portland, Maine. "With the airplane coming in, nice plane ... and the money coming off, I guess."
Trump went on to speculate that the tape was "given to us" by the Iranians to "embarrass our country and embarrass our president," apparently concluding that the footage had been released by Iranian intelligence or government security services.
"We have a president who's incompetent," Trump said.
Trump made similar comments on Wednesday.
He tweeted Friday morning that he was referring to a plane he was on TV that was carrying the hostages in Geneva, not the $400 million in cash.
The Washington Post reported that the tape Trump had seen was included in a Fox News report about the $400 million transfer on Wednesday, but that the executive jet displayed appeared to be in Geneva that day, not Iran, and did not show the transfer of cash.
Trump's spokeswoman, Hope Hicks, did not return requests for comment on the video.
The billionaire has frustrated Republicans in recent days with the lack of discipline at his campaign appearances and may have again stepped on his message by talking about a tape rather than the wider issue of why the United States was sending millions of dollars to its longtime foe.
The Obama administration has repeatedly rejected GOP accusations that the cash -- part of a $1.7 billion agreement to settle a decades-old arms deal dispute -- was meant to grease the release of four US prisoners who were freed in January when Tehran implemented a landmark nuclear deal. A fifth US prisoner was released separately.
Secretary of State John Kerry insisted Thursday that the United States never pays ransoms for hostages, rejecting accusations that a $400 million payment to Iran was a quid pro quo for the release of American prisoners.
"First of all, the United States of America does not pay ransom and does not negotiate ransoms with any country," Kerry said at a news conference in Argentina. "We never have and we're not doing that now. It is not our policy."
A furor erupted after The Wall Street Journal reported Wednesday on the circumstances and timing of a cash payment to Iran. CNN had at the time reported that the transfer had been arranged.
Trump has sought to make the Iran deal -- which the administration had previously announced in January -- into a political plus at a rocky moment for his campaign.
"You see it, you don't believe it," Trump said, accusing the administration of sending "bushels and bushels of cash" to Iran.
The GOP nominee suggested the money would find its way into the pockets of officials or be diverted towards terrorism, he said.
"How stupid are we to allow us to keep on going on?" asked Trump.
Two senior US officials told CNN, however, that while there was no "ultimatum" by the Iranians forcing the US to provide the $400 million cash payment in order to free the Americans, there was a general understanding on both sides that those issues -- along with the incipient nuclear deal -- would get wrapped up simultaneously.
Internally, there was an interagency discussion and nobody put their foot down trying to stop it from happening, even though there was an acknowledgment that the optics were problematic. When it became clear that all three issues were close to resolution around the same time, the decision was made to go ahead and do it all at once even so.
Republicans, including presidential nominee Donald Trump, condemned the transaction and have seized on it as a payment of ransom for prisoners that could put other Americans at risk. They also are labeling it an example of irresponsible administration dealings with a rogue power.
"Iran was in big trouble, they had sanctions, they were dying, we took off the sanctions and made this horrible deal and now they're a power," Trump said Wednesday in Daytona Beach, Florida.
Asked whether the Americans would have been released without the cash payment, one official said, "it is unknowable."
The money was flown to Iran on a plane carrying wooden pallets stacked with Swiss francs, euros and other currencies. The payment was made with Obama's approval as the first tranche of a $1.7 billion settlement resolving claims at an international tribunal at The Hague. The claims related to a failed arms deal under the time of the Shah Mohammad Reza Shah Pahlavi in which the US was left with Iranian funds when he was toppled by the Islamic Revolution in 1979 and the two countries cut ties.
Kerry tried to tamp down the uproar Thursday, saying, "This is not a new story. It doesn't represent anything the American people weren't told by the President and by the administration."
The Obama administration has admitted the circumstances of the payment do not look good but insists it was part of a complicated set of diplomatic maneuvers that were separate but came to fruition at the same time.
"We were aware ... of the optics ... (which is) one of the reasons we tried to address it up front," said State Department spokesman Mark Toner on Wednesday.
"The President spoke to this settlement, Secretary Kerry spoke to the settlement at the time and tried to say, 'Look, guys, I know (what) it looks like, but there's no there there,' " he said. "And so we've always been aware of it, but that didn't keep us from, frankly, sealing a deal that saved the American taxpayers a considerable sum of money."
Iran had been seeking more than $10 billion in arbitration.
Although the administration announced in January that it would pay $1.7 billion to Iran, it did not disclose the cloak-and-dagger style of the payments. The Journal report detailing the episode on Wednesday reopened the controversy over the administration's approach to Iran, including the nuclear deal, which Republicans vigorously oppose.
The White House argued on Wednesday that the fact Republicans are seizing on the cash story is proof that they are struggling to maintain their opposition to the historic nuclear agreement itself.
Officials also said the cash was delivered in such an unorthodox manner because Iran was still isolated from the international financial system owing to international sanctions.