The US administration pledged to help clear the way for autonomous vehicles with an investment of $4 billion to fund research and testing projects.
US Transportation Secretary Anthony Foxx made the announcement in Detroit, flanked by executives from Google and auto manufacturers General Motors, Ford Motor Co., Volvo, Fiat Chrysler and Honda.
"Much needs to be done to create the transportation system of the 21st century," Foxx said at the North American International Auto Show.
He said the Obama administration plans to ask for funding to speed up the introduction and use of autonomous vehicles, saying it would help reduce the congestion and improve road safety.
The initiative also aims to improve the US transportation system and vehicle-to-vehicle communications technology which helps cars avoid obstacles and accidents through better awareness of the surrounding environment.
"We are on course for a future where congestion will only get worse," said Foxx, adding that in the future 75 percent of the US population will be concentrated in 11 "mega regions."
Foxx said that because most accidents are caused by human error, autonomous vehicles can eliminate many road fatalities.
"By my simple math, that means that autonomous cars could have saved 25,000 lives last year," he said.
The agency is proposing that some funds be made available to local governments to develop the kind of infrastructure needed to increase the effectiveness of vehicle-to-vehicle communication.
Such an infrastructure can give drivers up-to-the-minute information on traffic conditions, or even automatically stop a vehicle short of crash by automatically applying brakes.
Foxx said DOT will propose rule changes over the next six months that will make it easier for car makers to install autonomous driving features in their vehicles.
DOT also will draft model legislation for could be used by various states and make it easier to introduce automated vehicles.
John Krafcik, who heads Google Cars, welcomed the effort, saying that to implement these changes "you need to have a clear path and guard rails and DOT is offering to provide that."
Mark Reuss, GM executive vice president for vehicle development, said he believes the initiative will help automakers as they move into an area where the technology is evolving rapidly.
GM, Ford Motor Co, Honda, Toyota, Mercedes-Benz, Audi, BMW, Toyota, Nissan and Hyundai have and all said they are actively working on autonomous driving, and have unveiled features such as automatic braking and automated steering that allow the driver to let go of the steering wheel.
The Mercedes-Benz E Class introduced earlier this week is capable of driving by itself, although it still requires a driver's attention.
Carlos Ghosn, Nissan's chief executive officer, told the Automotive News World Congress that Nissan has been a pioneer in autonomous vehicles and expects to have a fully autonomous vehicle on the road by 2020.
The DOT said it was working with automakers to develop common technical standards for autonomous cars and for vehicles to vehicle communication.
The agency also said it would work with automakers on rule-making, and confirmed that a self-parking system developed by Germany's BMW meets federal safety regulations.