Obama, who stressed his religious faith during the 16-month nominating battle with Democratic rival Hillary Clinton, said he learned early on as a community organiser in Chicago the value of acting on his faith.
"I came to see my faith as being both a personal commitment to Christ and a commitment to my community - while I could sit in church and pray all I want, I wouldn't be fulfilling God's will unless I went out and did the Lord's work," he said.
Obama said the office of Faith-Based and Community Initiatives set up by Bush as part of his "compassionate conservative" agenda never lived up to its early promise and social service programmes for the poor had been underfunded.
He proposed a new Council for Faith-based and Neighborhood Partnerships to reinvigorate the effort.
"The new name will reflect a new commitment," he said after a tour of a ministry that provides food, clothing and services for the needy in Zanesville.
His proposal would launch a training programme to offer instruction to community faith-based organisations on how to teach smaller groups to take advantage of government programmes, and he would provide new summer opportunities for up to 1 million children.
The new summer learning programme would cost $500 million a year - financed by cutting wasteful spending in federal procurement and management.
He stressed that recipients of government funds in the programme would be prohibited from discrimination on religious grounds in hiring and from proselytising with public funds, and the money could only be directed to nonreligious programmes.
"I believe deeply in the separation of church and state, but I don't believe this partnership will endanger that idea," Obama said.
Obama begins a three-day campaign swing to the West on Wednesday, visiting Colorado, North Dakota and winding up in Montana on the July 4 Independence Day holiday.
