The U.S. National Intelligence Estimate (NIE), published on Monday, stated that Tehran had put a stop to weapons production in 2003, although it was continuing to enrich uranium.
The report contradicted a previous U.S. intelligence assessment in 2005 which said that Iran was actively pursuing a nuclear bomb.
"That report symbolizes the victory of the Iranian nation against international forces on the issue of nuclear weapons," Mahmoud Ahmadinejad said.
He said Iran would not take a single step back in its peaceful nuclear program.
"The opponents of Iran's progress in the nuclear realm have retreated in the face of the fortitude of the Iranian nation," the president said.
"If you want to start up a new game, the Iranian people will resist and will not step back one inch. If you want to negotiate with us as an enemy, the Iranian people will resist and will conquer you. If it is on the basis of friendship and co-operation, the Iranian people will be a great friend," he added.
President Bush remained hawkish, however, saying on Tuesday that, "Iran was dangerous, Iran is dangerous and Iran will be dangerous if they have the know-how to make a nuclear weapon."
When asked if military action remained an option, the president answered, "The best diplomacy - effective diplomacy - is one in which all options are on the table."
"What's to say they couldn't start another covert nuclear weapons program?" the president told a news conference at the White House.
The International Atomic Energy Agency (IAEA) chief Mohamed ElBaradei welcomed the report, saying it was consistent with the agency's own findings and that it "should prompt Iran to work actively with the IAEA to clarify specific aspects of its past and present nuclear program."
Russia, which has previously stated its opposition to increased sanctions against Teheran, said it had no proof that Iran has ever run a nuclear weapons program.
"The data that we have seen does not allow us to say with certainty that Iran has ever had a nuclear weapons program," said Russian Foreign Minister Sergei Lavrov.
Ahmadinejad had earlier said that Iran would gain "a greatness that is 100 times more precious than nuclear energy," if it could withstand pressure from the West over its nuclear program.
"Confronting those who speak in the language of aggression... is more important than the possession of know-how in the nuclear sphere," said Mahmoud Ahmadinejad on November 21 at a rally at Ardebil, a city in the north east of Iran.
Two sets of mild UN sanctions are in place against Iran. China and Russia have both so far blocked the imposition of any new round of punitive measures against the Islamic Republic.
