Iran's foreign minister responded by saying Iran is ready to hold talks with the United States, but rejects Washington's demand for it to first suspend sensitive nuclear work.
As world powers geared up to meet in Vienna to consider the standoff with Iran, Washington announced its readiness to have its most substantive contact with Tehran since it broke diplomatic ties 26 years ago.
"My decision today says the United States is going to take a leadership position in solving this issue," President George W Bush said of efforts to curb Iran's suspected bid to build a nuclear bomb.
Secretary of State Condoleezza Rice said the US offer to join its European allies at the bargaining table with Iran would remove the "last excuse" for Tehran to avoid serious negotiations.
"To underscore our commitment to a diplomatic solution and to enhance the prospects for success, as soon as Iran fully and verifiably suspends its enrichment and reprocessing activities, the United States will come to the table with our EU colleagues and meet with Iran's representatives," she said.
Ms Rice said US officials had conveyed her prepared statement to Iranian officials through the Swiss government, which handles US interests in Tehran, and Iran's UN mission.
Diplomats in Vienna said Washington had linked its offer to join the talks to an agreement by Moscow and Beijing to drop their opposition to UN sanctions against Iran if the negotiations stall.
Ms Rice would not comment on any quid-pro-quo, saying only there was "substantial agreement" on the need to present Iran with a stark choice to benefit from economic and other incentives or face deepening isolation.
But she added there were "some outstanding issues" that needed to be sorted out at the Vienna talks.
The United States, which broke off ties with Iran after the 1979 seizure of US diplomats in Tehran, maintains channels through the Swiss embassy.
However a senior US official, who asked not to be named, said talks on the nuclear issue would represent the first "meaningful contact with the Iranian government" since the hostage crisis.
Iran has insisted its nuclear program is strictly for peaceful purposes and has consistently rejected demands to freeze uranium enrichment.
However the European Union hailed the US offer saying it will strengthen their hand in negotiations with Tehran.
French Foreign Minister Philippe Douste-Blazy, who along with his British and German counterparts has spearheaded diplomatic efforts to engage Tehran, said the US policy shift "reinforces the credibility" of Europe's efforts.
Russian Foreign Minister Sergei Lavrov, visiting Turkey, did not address the US offer but said there was "a positive atmosphere" before the Vienna talks and added "We hope the way will be open to a political solution."
A senior US official claimed, however, that Russia and China have agreed to return to the UN Security Council to seek sanctions against Iran if international powers failed to reach an accord with Tehran over its nuclear program.
Meanwhile UN nuclear chief Mohamed ElBaradei called on Iran to suspend uranium enrichment to clear the way for talks on its nuclear program with the United States.
Mr ElBaradei said he "strongly encourages Iran to create the conditions necessary for the resumption of these talks (with the European Union), with US participation, with a view to achieving a comprehensive settlement that is acceptable to both the international community and Iran".