He told the UN General Assembly's annual meeting in New York that sanctions against Iran were "violent".
He also welcomed Syria's acceptance of the Chemical Weapons Convention and condemned the use of such weapons.
Earlier, US President Barack Obama said he was encouraged by Mr Rouhani's "more moderate course".
He told the General Assembly that the diplomatic approach to settling the dispute over Iran's nuclear programme must be tested.
Mr Rouhani, who was elected earlier this year, has pledged a more open approach in international affairs.
Iran is under UN and Western sanctions over its controversial nuclear programme.
Tehran says it is enriching uranium for peaceful purposes but
the US and its allies, including Israel, suspect Iran's leaders of
trying to build a nuclear weapon.
'Full transparency'
President Rouhani said the "so-called Iranian threat" was imaginary.
"Iran poses absolutely no threat to the world or the region," he said.
"Nuclear weapon and other weapons of mass destruction have no
place in Iran's security and defence doctrine, and contradict our
fundamental religious and ethical convictions. Our national interests
make it imperative that we remove any and all reasonable concerns about
Iran's peaceful nuclear programme."
To this end he said Tehran was prepared to engage
"immediately in time-bound and result-oriented talks to build mutual
confidence and removal of mutual uncertainties with full transparency".
He criticised the use of international sanctions against Iran, comparing
them to the punitive measures used against Iraq while Saddam Hussein
was in power.
"These sanctions are violent - pure and simple," he said, adding that
it was not political elites that were affected "but rather... the
common people".
President Rouhani said that, while condemning any use of
chemical weapons "we welcome Syria's acceptance of the Chemical Weapons
Convention".
Iran, a staunch ally of Syria, has criticised US threats of
military strikes over the deadly chemical weapons attack on 21 August in
the suburbs of Damascus.
Speech 'cynical'
Syria has since agreed to a joint US-Russian plan to have its chemical weapons arsenal destroyed.
The real US and Iranian presidents failed to meet at the UN
President Rouhani said Tehran believed that access by extremist
groups to chemical weapons "is the greatest danger to the region".
He added: "Simultaneously, I should underline that
illegitimate and ineffective threat to use or the actual use of force
will only lead to further exacerbation of violence and crisis in the
region."
However, President Rouhani's address failed to impress
Israeli Prime Minister Benjamin Netanyahu who described it as
"cynical... full of hypocrisy".
"It had no practical suggestion to stop Iran's military
nuclear programme and no commitment to fulfil UN Security Council
decisions," he said in a statement.
In his speech, Mr Obama called for a strong UN resolution on Syria's chemical arms.
A much-anticipated encounter with President Obama did not materialise
He said the purpose of such a resolution should be "to verify
that the regime is keeping its commitments" to remove or destroy its
chemical weapons.
Mr Obama referred to Iranian suffering from chemical weapons
at the hands of Iraq when he said the ban on chemical weapons was
"strengthened by the searing memories of soldiers suffocated in the
trenches; Jews slaughtered in gas chambers; and Iranians poisoned in the
many tens of thousands".
The deal for Syria to hand over its chemical weapons by
mid-2014 was agreed earlier this month - averting a possible Western
military strike.
Differences have since emerged over whether the deal should
be enforced by a UN Security Council resolution under Chapter VII of the
organisation's charter, which would authorise sanctions and the use of
force if Syria did not comply with its obligations.
On Iran, Mr Obama said the US wanted to resolve the nuclear
issue peacefully, but was determined to prevent Iran from developing a
nuclear weapon.
"We are not seeking regime change, and we
respect the right of the Iranian people to access peaceful nuclear
energy," he insisted - an acknowledgment of the assertion frequently
made by Iranian authorities.
"Instead, we insist that the Iranian government meet its
responsibilities under the Nuclear Non-Proliferation Treaty and UN
Security Council resolutions."
"The roadblocks may prove to be too great, but I firmly
believe the diplomatic path must be tested" he added further into the
speech, saying he had urged Secretary of State John Kerry to pursue a
deal.
Earlier Mr Rouhani shook hands with French President Francois
Hollande, who said he expected "concrete gestures" from Iran to show it
was not developing nuclear weapons.
But a much-touted informal encounter between Mr Rouhani and Mr Obama failed to materialise.
On Thursday, Iran's Foreign Minister Mohammad Javad Zarif
will discuss its nuclear programme with US Secretary of State John Kerry
- a rare instance of a formal encounter between the counterparts.
The meeting will be attended by foreign ministers from the
other four permanent UN Security Council members - the UK, China, France
and Russia - and also Germany, which make up the so-called P5+1.