The casually dressed former president arrived in the resort island of Bali with his wife Michelle and their two daughters, a local military commander said.
"They arrived late last night and went straight to the hotel in Ubud," a local military commander, I Gede Widiyana, told AFP.
Obama woke up early and did some exercise in the lush green riverside resort, Widiyana said, but it was not known how the family would spend their time in the quiet and artsy Ubud area.
Next week, the family is slated to depart for Yogyakarta, where they are expected to visit ancient Borobudur temple. They will spend two days there before flying to Jakarta.
Obama spent four years until 1970 as a boy in the sleepy capital of Indonesia after his divorced mother married an Indonesian.
Many Indonesians felt a strong bond with Obama because of his exposure to Indonesia and its culture, even making him a two-metre (six-foot) bronze statue that was placed in his former school.
The statue of "Little Barry" -- as Obama was known to his Indonesian school friends -- depicts the boy Obama dressed in shorts and a T-shirt with a butterfly perched on his hand.
Indonesia's foreign ministry said Obama's visit to holiday in Indonesia came after several invitations from President Joko Widodo.
While in the capital, Obama will meet Widodo on June 30 and give a speech at an Indonesian diaspora convention the next day.