In her testimony to the House of Representatives Foreign Affairs Committee, she accused Tehran of supporting militants in Afghanistan and Lebanon as well as Iraq, and called Iran's policies "the single greatest challenge to American security interests in the Middle East and around the world."
She singled out the Quds Force, a special unit of Iran's Revolutionary Guards, for its actions in Iraq.
"We are determined to cut off Iran's malignant activities in Iraq by apprehending and eliminating Quds Force members and other actors who endanger human life and overall national stability," she said.
"We will defend ourselves and we will defend Iraqis against Tehran's meddling," she said.
Rice's comments come a week after President George W. Bush warned that if Iran develops nuclear weapons, the result could be a new world war.
However, she said the administration was set on pursing diplomatic routes to solve the issue.
Iran's new chief nuclear negotiator, Saeed Jalili, held talks in Rome today with European Union foreign policy chief Javier Solana focusing on the nuclear issue, and also met with Italian Prime Minister Romano Prodi.
Iranian President Mahmoud Ahmadinejad said on Wednesday that his country was open to talks on its nuclear program, but reiterated that it would not give up its right to develop atomic energy for peaceful purposes.