The president said the six-year conflict "has to end," but stressed Washington would continue to back its long-standing ally Saudi Arabia.
"We're stepping up our diplomacy to end the war in Yemen, a war which has created humanitarian and strategic catastrophe," Biden said.
"This war has to end, and to underscore our commitment, we are ending all America support for offensive operations in the war in Yemen, including relevant arms sales.".
Biden made his remarks in a speech to State Department diplomats.
The new policy marks a departure from the position of his two predecessors.
Saudi Arabia has itself recently been hinting at a willingness to reach a "political solution" in the drawn-out conflict. In the aftermath of Biden's speech, the official Saudi press agency reported: "The kingdom has affirmed its firm position in support of a comprehensive political solution to the Yemeni crisis, and welcomes the US emphasis on the importance of supporting diplomatic efforts to resolve [it]."
West's stance on Saudi-led strikes hardening, slowly
The possible change in US stance was first announced earlier in the day by Biden's national security adviser, Jake Sullivan.
More than 100,000 people are estimated to have been killed during the war, which broke out in 2014.
The conflict, which has left millions of Yemenis on the brink of starvation, initially involved the Yemeni government losing ground to an uprising by Iran-backed Houthi rebels. Saudi Arabia and eight other Arab states — at first with the support of the US, the UK and France — then launched airstrikes against the Houthis to halt their advances.
Tim Lenderking, an experienced diplomat and Middle East specialist, will be charged with spearheading those efforts.
The United Nations says the humanitarian crisis in Yemen is the world’s worst. It estimates 80% of the country’s population, or 24 million people, are in need, often as a result of food or aid shortages.
President Biden also plans to review one of the Trump administration’s final moves.
Last month Mr Trump's Secretary of State, Mike Pompeo, announced that the Houthis were being designated a"terrorist organization".
Aid organizations warned it could prevent them from operating in areas where millions are in urgent need of food aid.