Mr Obama, whose interview on The Late Show with Stephen Colbert aired in part on Monday, said the situation was “a screw-up”.
Mr Colbert asked: "How does Dolly Parton not have a Presidential Medal of Freedom?
“Looking back on your eight years, do you realise that was the mistake you made?”
Mr Obama admitted he “was surprised” she had not been honoured with the presidential medal, and that it was an oversight on his part.
"That's a mistake, I'm shocked," he told the Late Show host. “I think I assumed that she had already got one, and that was incorrect."
Mr Obama added that “she deserves one”, and that he would call president-elect Joe Biden about the award.
Ms Parton, who has ten Grammy Awards and 25 number one singles to her name, made news last month because she donated $1m to pharmaceuticals company Moderna, who announced a Covid-19 vaccine had been developed.
Bob Dylan, Stevie Wonder, Diana Ross, Gloria Estefan and Barbra Streisand were among those awarded Medals of Freedom by Mr Obama, while he was president, but not Ms Parton.