His comments came in a speech on Wednesday looking ahead to the 15 December elections in Iraq as his administration tries to counter American unease with his war strategy.
"In two-and-a-half years, the Iraqi people have made amazing progress," he said. "They've gone from living under the boot of a brutal tyrant, to liberation, to free elections, to a democratic constitution."
Speaking to the Council on Foreign Relations in Washington, Bush vowed he would not be swayed by those critics arguing for a timetable for withdrawing US troops from Iraq.
"To do so," he said, "would be a victory for Iraq's al-Qaida leader Ab Musab al-Zarqawi and top al-Qaida leader Osama bin Laden".
"We are not going to yield the future of Iraq to men like Zarqawi and we are not going to yield the future of the Middle East to men like bin Laden. We will complete our mission in Iraq and leave behind a democracy that can govern itself, sustain itself, and defend itself," Bush said.
The White House has taken the offensive against critics who say the administration does not have a clear strategy for winning in Iraq and that there should be a plan for pulling out the roughly 155,000 US troops there.
Opposition to the Iraq war is
growing in the US
In his speech Bush cited Mosul and Najaf as examples of cities where reconstruction efforts are progressing.
"Over the course of this war we have learned that winning the battle for Iraqi cities is only the first step. We also have to win the battle after the battle, by helping Iraqis consolidate their gains and keep the terrorists from returning," Bush said.
"Construction jobs are putting local residents back to work in Najaf, the hospital is open and elected officials are in charge of the city's government," Bush said.
But he added problems remain, such as electrical outages, a shortage of clean water and the spate of kidnappings.
In Mosul, he said, local Iraqi leaders have upgraded key roads and bridges over the Tigris River, rebuilt schools and hospitals, improved the city's water and sewage network, and begun refurbishing the airport.
But he said Mosul – Iraq's third largest city with a mixed population of Sunni Arabs and Kurds – is still is not receiving enough electricity and militant intimidation remains a concern.
US troops have so far failed to
restore order in Iraq
Another obstacle, Bush said was corruption at both the local and national levels of the Iraqi government - a factor he said would not be tolerated.
He added that the US embassy in Baghdad is demanding openness and accountability for the billions of dollars being spent on reconstruction.
He also cited as a problem the infiltration of militant groups into some Iraqi security forces, particularly the Iraqi police, and said that "former militia members must shift their loyalty to the national government and learn to operate under the rule of law".
Bush, whose public approval ratings at home have hit the lowest of his presidency, is scrambling to regain American support for the Iraq mission amid doubts about the war.
"We are not going to yield the future of Iraq to men like Zarqawi and we are not going to yield the future of the Middle East to men like bin Laden"
US President George Bush
More than 2100 US military personnel have been killed since the March 2003 invasion.
Democrats say the president needs to produce a clearer plan on Iraq.
On Tuesday, Senate Democratic leader Harry Reid of Nevada, Senator Carl Levin of Michigan and Senator Jack Reed of Rhode Island wrote an open letter to Bush expressing their concerns.
"Only by outlining for the American people a full and complete strategy for success with the political, economic and military benchmarks by which to measure the progress and fully and publicly briefing the Congress about this strategy will the troops, their families and the American people truly benefit," the letter said.