"Iran's leaders say that their nuclear program is for medical research and electricity," Obama said in a video message to ordinary Iranians.
"To date, however, they have been unable to convince the international community that their nuclear activities are solely for peaceful purposes," Obama said. "That's why the world is united in its resolve to address this issue and why Iran is now so isolated."
But Tehran can "take immediate and meaningful steps to reduce tensions and work toward an enduring, long-term settlement of the nuclear issue," Obama said in the video released on the Iranian-Persian New Year, Nowruz.
Obama was to fly to Israel Tuesday to discuss Iran's disputed nuclear program. Tehran and world powers are separately preparing for a new round of nuclear talks next month.
"Now is the time" for Tehran to take action, said Obama, who is to hold 5 hours of talks Wednesday with Israeli Prime Minister Binyamin Netanyahu.
Obama said last week Tehran was more than "a year or so" away from developing a nuclear weapon. Netanyahu told the United Nations in September Israel believed Iran would be close to nuclear weapons capability in the spring or summer of this year.
Netanyahu -- who has called a nuclear-armed Iran an existential threat to Israel -- has hinted it might unilaterally attack Iran if Jerusalem believes Tehran's nuclear program is close to nuclear weapons capability.
"The United States prefers to resolve this matter peacefully, diplomatically," Obama told Iranians.
"Indeed, if, as Iran's leaders say, their nuclear program is for peaceful purposes, then there is a basis for a practical solution," Obama said. "It's a solution that would give Iran access to peaceful nuclear energy while resolving once and for all the serious questions that the world has about the true nature of the Iranian nuclear program.
"I hope they choose a better path -- for the sake of the Iranian people and for the sake of the world," said Obama, whose broadcast appeared with Persian subtitles.
He began the video with the Persian greeting "durood," an invocation that also compliments the Islamic Prophet Muhammad.
"As you gather with family and friends this Nowruz, many of you will turn to the poet Hafez who wrote, 'Plant the tree of friendship that bears the fruit of fulfillment; uproot the sapling of enmity that bears endless suffering,'" Obama said, citing the 14th century Iranian poet whose works are a staple of Iranian homes.
Many Iranians learn his poems by heart and use them as proverbs and sayings.
"As a new spring begins, I remain hopeful that our two countries can move beyond tension," Obama said. "And I will continue to work toward a new day between our nations that bears the fruit of friendship and peace."
Tehran had no immediate comment on the video, Obama's fifth annual message to Iranians since taking office in 2009.