"America is pursuing a diplomatic resolution to the Iranian nuclear issue, as part of our commitment to stop the spread of nuclear weapons and pursue the peace and security of a world without them. This can only happen if Iran takes this historic opportunity," Obama said in his annual address at the General Debate of the UN General Assembly.
"My message to Iran's leaders and people is simple: do not let this opportunity pass. We can reach a solution that meets your energy needs while assuring the world that your program is peaceful," he said.
The West fears that Iran is using its nuclear program as a cover to develop nuclear weapons, a charge denied by Tehran.
Terming the "status quo" in the West Bank and the Gaza Strip as "not sustainable", Obama vowed that America will stand up for the principle that Israelis, Palestinians and the region will be "more just" with two states living side by side, in peace and security.
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"As bleak as the landscape appears, America will never give up the pursuit of peace. The situation in Iraq, Syria and Libya should cure anyone of the illusion that this conflict is the main source of problems in the region; for far too long, it has been used in part as a way to distract people from problems at home," Obama said.
"No external power can bring about a transformation of hearts and minds. But America will be a respectful and constructive partner. We will neither tolerate terrorist safe-havens, nor act as an occupying power.
"Instead, we will take action against threats to our security - and our allies - while building an architecture of counter-terrorism cooperation," he said.
Using his address to speak directly to the young people across the Muslim world, Obama said that they come from a great tradition that stands for education, not ignorance; innovation, not destruction; the dignity of life, not murder.
He addressed the Ebola crisis, saying the US is deploying its doctors and scientists, supported by its military to help contain the outbreak of Ebola and pursue new treatments.
He called on the international community to join hands to fight the outbreak which has impacted the lives of millions across West Africa.
Obama said, the "only lasting solution to Syria's civil war is political - an inclusive political transition that responds to the legitimate aspirations of all Syrian citizens, regardless of ethnicity or creed."