President George W. Bush vowed to rally the world to prevent Iran getting a nuclear weapon after Tehran threatened to resume uranium enrichment if major powers report it to the UN Security Council.
In his annual State of the Union address, an occasion Mr Bush used four years ago to call Iran part of an "axis of evil," the president refrained from fierce rhetoric, although he accused Tehran's clerical leaders of holding their people hostage.
US President George W Bush
The US earlier won agreement from a reluctant China and Russia to back taking the Iranian nuclear issue to the Security Council, a step that could ultimately lead to sanctions.
In Tehran, the government threatened to halt snap UN inspections of its nuclear sites and resume uranium enrichment if it was reported to the UN Security Council, as agreed by the council's five permanent members.
The UN nuclear watchdog, the International Atomic Energy Agency, said Iran had already begun preparing for uranium enrichment, which can potentially produce fuel for bombs, and continued to hinder inquiries into its atomic activities.
"The Iranian government is defying the world with its nuclear ambitions - and the nations of the world must not permit the Iranian regime to gain nuclear weapons," Mr Bush said. "America will continue to rally the world to confront these threats."
Four years ago Mr Bush named Iran with North Korea and Iraq as countries which, with their "terrorist allies, constitute an axis of evil, arming to threaten the peace of the world."
With all sides engaged in high-stakes negotiations, he avoided such language last night, although he described Iran as "a nation now held hostage by a small clerical elite that is isolating and repressing its people."
Speaking directly to Iranians, Mr Bush said: "We respect your right to choose your own future and win your own freedom. And our nation hopes one day to be the closest of friends with a free and democratic Iran."