The U.S. National Intelligence Estimate (NIE), published on Monday, contradicted a previous intelligence assessment in 2005 which stated Iran was actively pursuing a nuclear bomb.
The NIE, which brings together the views of 16 U.S. intelligence organizations, said: "Tehran's decision to halt its nuclear weapons program suggests it is less determined to develop nuclear weapons than we have been judging since 2005."
Iran's foreign minister said that the West would now have to review its position on Iran's nuclear program, taking the report into account.
"Now those states that had questions and concerns [about the peaceful character of] Iran's nuclear program will have to adjust their position, by factoring in realities," Manuchehr Mottaki said.
His view was echoed by Alaeddin Boroujerdi, head of Iran's parliamentary foreign policy and security commission: "The recognition by the U.S. intelligence community of the peaceful orientation of Iran's nuclear program should become official policy for the U.S. administration."
"I believe that from the beginning American intelligence organizations knew Iran had not deviated (from peaceful atomic aims)," he said.
But the assessment said Iran is continuing to enrich uranium, which is the biggest stumbling block for Western countries, and could still develop nuclear weapons, but not until 2010 - 2015.
U.S. National Security Adviser Stephen Hadley said the risk of Iran acquiring a nuclear weapon remains "a serious problem." The estimate suggests Bush "has the right strategy: intensified international pressure along with a willingness to negotiate a solution that serves Iranian interests, while ensuring the world will never have to face a nuclear-armed Iran," he said.
Iran would not be able to technically produce and reprocess enough plutonium for a weapon before about 2015, the report says. But ultimately it has the technical and industrial capacity to build a bomb "if it decides to do so."
The U.S. and its European allies suspect Iran of pursing a covert program to build nuclear weapons and have pushed for tougher sanctions against Tehran. The Islamic Republic has refused to halt uranium enrichment, a process needed in both weapons production and electricity generation, insisting that its nuclear program is peaceful.
A report delivered last month by the chief of the International Atomic Energy Agency, Mohamed ElBaradei, stresses the positive aspects of Iran's "nuclear dossier," saying the country has provided extra documentation, noting, however, that the Islamic Republic was continuing to enrich uranium.
Iran has interpreted this as IAEA recognition of its nuclear program's stated peaceful goals, and has demanded that two sets of sanctions be lifted against the Islamic Republic.
Iranian President Mahmoud Ahmadinejad has said his country's efforts to withstand Western pressure to close down the nuclear program are of more importance to him than the actual program itself.
Saeed Jalili, who heads Iran's Supreme National Security Council, held talks in London Friday with EU foreign policy chief Javier Solana prior to a meeting in Paris on Saturday between the six countries mediating in the Iranian nuclear dispute.
A further round of sanctions against the Islamic Republic has so far been blocked by China and Russia.