Forbes said that Obama''s "lame duck period" had started earlier than usual, while Putin strengthened his control over Russia, the BBC reports.
According to the report, it is the first time in three years that Obama has dropped to the second place on the Forbes list.
Putin showed his strength by granting asylum to former National Security Agency (NSA) contractor Edward Snowden in August, who is wanted in the U.S. over several intelligence document leaks.
Putin also strongly averted Obama''s threats of missile strikes on Syria with a plan for Damascus to hand over chemical weapons.
On the other hand, Obama has been struggling from a 16-day U.S. government shutdown caused by a budget and debt crisis in Washington.
Top 10 most powerful people of the world according to Forbes 2013 are:
1) Vladimir Putin, Russian President
2) Barack Obama, US President
3) Xi Jinping, Chinese President
4) Pope Francis, Roman Catholic Church
5) Angela Merkel, German Chancellor
6) Bill Gates, co-chair, Bill & Melinda Gates Foundation
7) Ben Bernanke, Federal Reserve chairman
8) Abdullah bin Abdul Aziz Al Saud
9) Mario Draghi, European Central Bank president
10) Michael Duke, Wal-Mart CEO