Obama and daughters Malia and Sasha joined family friends, officials, entertainers, athletes, business executives and big donors at the gala, sources were quoted by the Chicago Tribune as saying.
Beyonce, John Legend and Stevie Wonder rocked the White House at the star-studded dance party which kicked off Saturday and lasted until the wee hours of on Sunday morning.
The event was closed to the press, and the White House did not release a guest list or any other details.
The two guests, however, spoke to the daily, describing the bash at which a deejay kept people on the dance floor in the East Room until after 3 am (local time).
VIP guests, according to sources, included among others political luminaries Bill and Hillary Clinton, Vice President Joe Biden, House Minority Leader Nancy Pelosi, White House senior adviser Valerie Jarrett, national security adviser Susan Rice and US Attorney General Eric Holder.
Other high-profile guests from a non-political background present at the bash were Paul McCartney, Magic Johnson, actress/singer Jennifer Hudson, singer Janelle Monae, actor Kal Penn, actress Ashley Judd and tennis great Billie Jean King among others, the sources said.
Even the high-wattage crowd could not outshine the evening's most memorable moment: President Obama breaking out in the "Dougie" on the dance floor.
Guests said Obama and his wife let their hair down during the dance party, which took up the entire State Floor of the White House - including the gilded East Room, the formal parlors, and the ornate State Dining Room.
Guests moved about freely, grabbing snacks, drinks and desserts but no dinner, CNN reported.
Obama, who was spotted with a martini glass, spoke about his wife at the party, saying she was great mother and wife and that she had made him a better man. The President's mother-in-law, Marian Robinson, also turned out.
The East Room was loaded with dancers and "most people were in there dancing all night long," a source said. The music was a mix of rhythm and blues and contemporary club music, the source said.
The first lady "seemed very comfortable and happy. Very celebratory. It was such a fun, fun party," said the other source.
Michelle's birthday has been in the news ever since she asked guests attending her birthday bash to wear comfortable shoes, practice their dance moves and eat before coming to the party.