Taking the floor first at the UN General Assembly Tuesday, Obama responding to what he called "positive signals" from Iran offered a diplomatic path to solve Tehran's nuclear issue. At the same time he made clear that the US was committed to preventing Iran from developing a nuclear weapon saying "We will not tolerate the development or use of weapons of mass destruction."
America's "difficult history" with Iran can't be overcome overnight as "the suspicion runs too deep," Obama told the annual gathering of world leaders but he did see an opportunity to take a "major step down a long road toward a different relationship."
"The road blocks may prove to be too great, but I firmly believe that the diplomatic path must be tested," Obama said assuring Tehran "We are not seeking regime change, and we respect the right of the Iranian people to access peaceful nuclear energy."
The president also said he is directing Secretary of State John Kerry to work with Iran's government on a diplomatic solution to the issue of Iran's nuclear programme. Kerry will meet Thursday with Iran's Foreign Minister Javad Zarif along with his counterparts from five permanent members of the UN Security Council plus Germany negotiating to contain Iran's nuclear programme.
Thursday's meeting would be the first formal face-to-face session between the top US and Iranian diplomats since the overthrow of pro-American Shah Mohammed Reza Pahlavi more than 34 years ago.
As Obama spoke there was widespread speculation that he may give further impetus to his offer with a "chance encounter" and a handshake with Rouhani.
But shortly before Rouhani spoke, two senior administration officials told reporters that the two would not be meeting as such an encounter proved too complicated for Iran back home.
Hours later, Rouhani striking a conciliatory tone signalled Iran's willingness to "engage immediately in time-bound and result-oriented talks to build mutual confidence and removal of mutual uncertainties.
"Nuclear weapons and other weapons of mass destruction have no place in Iran's security and defence doctrine, and contradict our fundamental religious and ethical convictions," he said.
Decrying international sanctions against Iran Rouhani said: "Sanctions, beyond any and all rhetoric, cause belligerence, war-mongering and human suffering."
Asserting that "Iran seeks to resolve problems, not to create them," Rouhani said his country "does not seek to increase tensions with the United States."
The Iranian leader said he listened carefully to US President Barack Obama's speech and hoped that the United States "will refrain from following the short-sighted interests of warmongering pressure groups" so that the two nations "can arrive at a framework to manage our differences."
Three US Republican senators John McCain, Lindsey Graham and Kelly Ayotte offered cautious support to Obama administration's diplomatic initiative with Iran saying they were "deeply sceptical about the real motivations behind Iran's charm offensive."
"We need to approach the current diplomatic initiative with eyes wide open, and we must not allow Iran to use negotiations as a tool of delay and deception," they said.
The Washington Post also editorially cautioned that "New hopes for diplomacy should not blind the US to Iran's bottom line" and advised the Obama administration "to swiftly demand that Mr. Rouhani make clear his bottom line - and prick the bubble he has been inflating.