"Before I begin, I know some of you have noticed that I'm dressed a little differently from the other gentlemen. Because of sequester, they cut my tails," quipped Obama, the chief guest at the 128th annual Gridiron Club and Foundation dinner, an exclusive and off-camera white-tie event for top American politicians and journalists where they poke fun at each other.
"My joke writers have been placed on furlough. I know a lot of you reported that no one will feel any immediate impact because of the sequester. Well, you're about to find out how wrong you are," he said on Friday.
"There is one thing in Washington that didn't get cut: The length of this dinner. Yet more proof that the sequester makes no sense."
US politicians and journalists use the dinner for the foundation, which supports scholarships and journalistic organisations, to showcase their comedic skills.
Obama attended the dinner, a week after the budget cuts, known as the sequester, came into force when he and Republicans failed to agree a deficit cutting deal.
Obama, 51, also took a jab at his new secretary of state John Kerry, who is attempting to move out from the shadow of his high-profile predecessor, Hillary Clinton. "Let's face it, Hillary is a tough act to follow -- frankly, though, I think it's time for him to stop showing up at work in pant suits. It's a disturbing image. I don't know where he buys them. He's a tall guy."
Obama did not spare his Vice President Joseph Biden, as the 70-year-old politician has still not ruled out contesting at the Democratic presidential nomination in 2016.
"It's no secret that my vice president is still ambitious. But let's face it; his age is an issue. Just the other day, I had to take Joe aside and say, Joe you are way too young to be the pope."
Obama also joked about Republican Senator Marco Rubio pausing while delivering the response to his state of the Union speech in order to reach for a water bottle and take a sip.
Obama, said, "As I begin my second term, our country is till facing enormous challenges," then paused for a long drink, and added, "That, Marco Rubio, is how you take a sip of water."
Rubio received nationwide attention for his sip of water during the Republican response to the State of the Union.
About 650 guests dined on ginger-roasted shrimp, sea bass with vintage port sauce, fruit and berry salad at the event held at Renaissance Washington Hotel.
'26/11 could happen again, even bigger and worse'
John Brennan sworn in as CIA director
Obama for sweeping reforms to stem gun violence
The best PHOTOS of the month: February
US senate confirms Brennan as CIA director