The US jobless rate sank to 7.8% in September, surprising many who expected it to remain flat at 8.1%, the Labor Department said on Friday.
The unemployment figure was the lowest since President Barack Obama took office in January 2009.
Analysts said the fall in the unemployment rate would provide the incumbent with a chance to talk about an improving economy and refocus his campaign after his poor debate performance this week against Republican Mitt Romney.
The unemployment rate had remained at 8% or higher since February 2009, the longest stretch since monthly jobless figures were first compiled in 1948.
The US economy generated only 114,000 new jobs last month, but upward revisions to earlier data helped bring the overall unemployment rate down.
The number of new jobs in August was revised up to 142,000 from 96,000 reported earlier.
The private sector, which has been adding jobs since March 2010, grew by 104,000 workers. Governments, where cuts have been a drag on the recovery, added 10,000 jobs in September.
Manufacturing, one of the bright spots that President Obama has showcased throughout his re-election campaign, shed 16,000 jobs after losing a revised 22,000 in August, and construction jobs grew by 5,000. The number of temporary jobs, a harbinger of future growth, fell by 2,000.
The unemployment rate dropped even though the number of people in the labour force, including those looking for work, increased.