US President Barack Obama said the United States must change its policy or face a deepening rift with the Arab world, pledging to promote reform across a region hit by six months of protest.
In a speech responding to the events of the "Arab Spring", Obama also unveiled a multi-billion-dollar economic plan to spur and reward democratic change in the region, modelled on the evolution of post-Soviet eastern Europe.
The president meanwhile called on the governments of Bahrain and Yemen to work with their opposition parties to resolve the unrest which has rocked their countries.
And a day after imposing financial sanctions on Syrian President Bashar al-Assad and six top aides, Obama said Assad must lead a political transition or "get out of the way" of the movement for democracy in his country.
As Arabs in the Middle East and North Africa call out for dignity after decades under the yoke of autocrats, many backed by the United States, he said Washington had to do more than just pursue its core interests.
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These interests, he said, are countering terrorism, stopping the spread of atomic weapons, securing the free flow of commerce, standing up for Israel's security and pursuing Arab-Israeli peace.
"We must acknowledge that a strategy based solely upon the narrow pursuit of these interests will not fill an empty stomach or allow someone to speak their mind," he said.
"Moreover, failure to speak to the broader aspirations of ordinary people will only feed the feeling that's festered for years that the United States pursues our interests at their expense," Obama said.
"Given that this mistrust runs both ways, as Americans have been seared by hostage taking and violent rhetoric and terrorist attacks that have killed thousands of our citizens, a failure to change our approach threatens a deepening spiral of division between the United States and the Arab world," he said.
He said the uprisings show that a policy of repression will no longer work as people seek to win their freedom and human rights.
He also warned that al-Qaeda's agenda of "extremism" was now seen as a "dead-end" in Arab nations.
In saying US "friends in the region have not all reacted to the demands for change consistent with the principles" of human rights and freedoms, Obama singled out Yemen, a key ally in the fight against al-Qaeda.
He said President Ali Abdullah Saleh "needs to follow through on his commitment to transfer power".
Saleh foiled a Gulf plan aimed at ending a bloody political dispute "by refusing to sign it" on Wednesday, the head of the opposition Common Forum, Yassin Saeed Noman, told AFP.
But a ruling Yemeni party official said the Gulf-sponsored accord to end the bloody political dispute would be signed on Sunday in Sanaa.
According to the Gulf-brokered proposal, Saleh would quit office within 30 days in return for immunity from prosecution, before a government of national unity is formed and elections for a new president held after two months.
Deadly protests calling for the departure of Saleh, who has been in power since 1978, have gripped the country since January.
Turning to Bahrain, another key regional ally, Obama said: "We have insisted publicly and privately that mass arrests and brute force are at odds with the universal rights of Bahrain's citizens.
"The only way forward is for the government and opposition to engage in a dialogue, and you can't have a real dialogue when parts of the peaceful opposition are in jail," the US leader said.
"The government must create the conditions for dialogue, and the opposition must participate to forge a just future for all Bahrainis."
Bahraini authorities have said 24 people, most of them protesters, were killed during the month-long unrest, which ended after a crackdown in March on the Shi'ite-dominated protest movement demanding political reforms.
However, he omitted to mention rumblings of reform in oil-rich ally Saudi Arabia, which has also sent troops to crush Shi'ite-led dissent in neighbouring Bahrain. Both Saudi Arabia and Bahrain are run by Sunni monarchies.
In calling on Syria's Assad to lead a political transition to democracy or "get out of the way", Obama called on the Syrian government to stop shooting demonstrators, allow peaceful protests, and release political prisoners.
"So far Syria has followed its Iranian ally seeking assistance from Tehran in the tactics of suppression," he said.
He also said in Libya, where the United States joined a military intervention to prevent a massacre of the opposition, Colonel Muammar Gaddafi will "inevitably" leave or be forced from power.
The United States has asked the World Bank and the International Monetary Fund to present a plan at next week's G-8 summit for "what needs to be done to stabilise and modernise the economies of Tunisia and Egypt", Obama said.
"Together, we must help them recover from the disruption of their democratic upheaval, and support the governments that will be elected later this year," he said.
He also promised to relieve "a democratic Egypt of up to $US1 billion ($A942 million) in debt."
