Clinton also covered Middle East peace efforts and the US' role in the global economy during her wide-ranging foreign policy address.
The US government will only grant Iran a limited amount of time to respond to Washington's offer to hold talks, Clinton said.
"Iran can become a constructive actor in the region if it stops threatening its neighbours and supporting terrorism. It can assume a responsible position in the international community if it fulfils its obligations on human rights.
|Iran has insisted that its uranium enrichment programme is purely peaceful [AFP]
"The choice is clear – we remain ready to engage with Iran, but the time for action is now. The opportunity will not remain open indefinitely."
The US, Israel and European Union member countries have repeatedly accused Iran of driving its uranium enrichment programme towards building a nuclear weapon.
Tehran has denied the claims, saying that its nuclear work is aimed at generating electricity.
Blake Hounshell, managing editor of Foreign Policy magazine, said that Clinton's message to Iran showed that the Obama administration had grown pessimistic on the chance of direct talks with Tehran.
"What you are now seeing from the administration is that they are prepping the ground for a new round of sanctions at the UN Security Council level if Iran does not respond the US offer [of direct talks]," he said.
The informal deadline for Iran to agree to direct talks with the US is the United Nations General Assembly meeting in late-September.
The five permanent members of the UN Security Council (the US, France, Britain, Russia and China) and Germany have already offered Iran the chance to enter dialogue on its nuclear programme.
Manouchehr Mottaki, Iran's foreign minister, had said on Saturday that his ministry was preparing a "package" in response to that offer.
However, Tehran may try to split the UN Security Council permanent members, Hounshell said.
"What I expect Iran to do is divide and conquer – to try to do just enough to make China and Russia happy, but not quite enough to satisfy France, Britain and the United States," he said.
Clinton also used robust language on the strength of the US military during the course of her address, a hint that Washington is not averse to the use of force should diplomacy fail.
"There was not a lot of subtlety. I think it was underscoring the fact that the US does have military options," Hounshell said.
"Clinton said that the US prefers diplomacy but 'don't think that the United States is a pushover'."