Spokesman Bill Burton told reporters with the president that the administration and BP were "working out the particulars," such as the exact amount of the fund and how it would be run.
Burton said the account would be in the hands of a third-party and would amount to "billions of dollars."
"We're confident that this is a critical way in which we're going to be able to help individuals and businesses in the Gulf area become whole again," he said.
On his fourth visit to the region, Obama was determined to assert leadership in face of the calamity, with the White House showing the president using all the power available to him to stem the continuing flood of oil into the Gulf and extract compensation from BP for victims of the tragedy.
Obama's first stop on Monday was a briefing at a Coast Guard station here on Mississippi's coast, where he said that the two days in the region would help him prepare for Wednesday's showdown with BP. In particular, Obama said there continues to be problems with claims for damages and with effective coordination.
"We're gathering up facts, stories, right now so that we have an absolutely clear understanding about how we can best present to BP the need to make sure that individuals and businesses are dealt with in a fair manner and a prompt manner," the president said.
He then headed to lunch with some local residents.
BP's board gathered Monday in London to discuss deferring its second-quarter dividend and putting the money into escrow until the company's liabilities from the spill are known.
The administration had said earlier — uncertain that BP would voluntarily establish the damage fund — that Obama was prepared to force BP to take the step.
The president 's two-day visit to Mississippi, Alabama and Florida precedes his first-ever Oval Office address to the U.S. Tuesday night and his first face-to-face meetings with BP executives on Wednesday.
BP said in a statement its costs for responding to the spill had risen to $1.6 billion, including new $25 million grants to Florida, Alabama and Mississippi. It also includes the first $60 million for a project to build barrier islands off the Louisiana coast. The estimate does not include future costs for scores of damage lawsuits already filed.
Obama's first three trips to the Gulf took him to the hardest-hit state, Louisiana. On Monday, Day 56 since the BP-leased Deepwater Horizon drilling rig exploded and unleashed a fury of oil into the Gulf, he started his tour in Gulfport, Mississippi. From there he'll travel along the coast to Alabama, where oil was washing up in heavy amounts along the state's eastern shores.
He will meet state and local officials eager for him to show command, provide manpower and supplies and also tell the public that despite the catastrophe that's crippling the fishing and tourist trades, many beaches are still open.
The day includes a speech and a ferry ride to view barrier islands in Alabama where oil has come ashore. Obama has not taken to the water in his previous Gulf visits.
The administration said early Monday that BP had responded to a letter sent over the weekend asking the company to speed up its ability to capture the spewing oil.
In its response, BP said it would target containing more than 2 million gallons (8 million liters) of oil a day by the end of June, up from about 630,000 gallons (2.4 million liters) of crude a day now. The government's high-range estimates say as much as 2.1 million gallons (8 million liters) a day could be billowing from BP's runaway well.
Although BP is now siphoning significant amounts from its blownout well 5,000 feet (1,500 meters) below the ocean's surface, the leak will not be killed for good until relief wells are completed in August.
Increasingly accurate estimates of the spill have brought the enormity of the disaster into focus. Already potentially more than 100 million gallons (380 million liters) of crude expelled into the Gulf, far outstripping the 1989 Exxon Valdez disaster.