"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," she said.
Clinton also used robust language on the strength of the US military in her address, suggesting that Washington is not averse to the use of force should diplomacy fail.
|The US has repeatedly accused Iran of seeking nuclear weapons [EPA]
Blake Hounshell, managing editor of Foreign Policy magazine, said "there was not a lot of subtlety" in her speech, "underscoring the fact that the US does have military options".
"Clinton said that the US prefers diplomacy but 'don't think that the United States is a pushover'," he added.
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.
Hounshell said Clinton's message to Iran indicated 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 to 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 – along with 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 covered Middle East peace efforts and the US role in the global economy during her wide-ranging foreign policy address.