Barack Obama on Wednesday defended his approach to dealing with Iran, telling a U.S. lobbying group for Israel that he would do "everything in my power" to prevent Iran from gaining nuclear capability.

The presumptive Democratic nominee -- giving his first policy speech since seizing the nomination Tuesday night -- warned Israel's backers not to believe the "willful mischaracterizations of my positions" on using diplomacy with Iran.

"Contrary to the claims of some, I have no interest in sitting down with our adversaries just for the sake of talking. But as president of the United States, I would be willing to lead tough and principled diplomacy with the appropriate Iranian leaders at a time and place of my choosing -- if, and only if -- it can advance the interests of the United States. That is my position. I want it to be absolutely clear," he told the American Israel Public Affairs Committee's annual policy conference.

Obama said diplomacy is not synonymous with weakness. He suggested that Iran will be given a choice -- abandon its "dangerous nuclear program, support for terror and threats to Israel," in exchange for "meaningful incentives -- including the lifting of sanctions, and political and economic integration with the international community."

"If you refuse, we will ratchet up the pressure," he said. That includes strengthening the U.S. hand with Russia and China in the Security Council and working with allies to isolate the Iranian regime outside of U.N. sanctions.

Those sanctions include cutting off loan guarantees, banning the export of refined petroleum to Iran and boycotting firms associated with the Iranian Revolutionary Guard Corps.

John McCain seized on Obama's call for boycotting the IRGC, a designated terror group, saying that when he had a chance to vote for a resolution against the IRGC, he did not.

The IRGC is "clearly an organization that has contributed to enormously to our casualties and challenges in Iraq. He voted against that and at the time he made some statement about that it might be be provocative to the Iranians. Again a fundamental misunderstanding of the Iranians and the challenge they present to us and our national security interests in the Middle East," McCain told reporters in a press briefing.

Obama and McCain have been at odds over U.S. policy toward Iran. In speaking to AIPAC on Monday, the Arizona senator said that Obama's willingness to meet with Iranian President Mahmoud Ahmadinejad would be a "spectacle" that would embolden extremists. He added that such an approach demonstrates the Illinois senator's “serious misreading of history.

Addressing reporters on Wednesday, McCain said that regardless of what Obama says now, he "repeatedly stated his commitment to meeting with the president of Iran."

"It shows a naivete and lack of experience that Americans will make a judgment about ... If he wants to reverse his position he is free to do so," he said.

At AIPAC, McCain proposed a new approach to sanctions on Iran, suggesting severely limiting Iranian imports of gasoline, targeted sanctions such as denying visas and freezing assets and calling on the international community to divest itself from Iran the way it did in South Africa in an effort to end apartheid.

Obama responded that McCain's call for divestment is an idea he borrowed from Obama himself.

"It’s a good concept, but not a new one. I introduced legislation over a year ago that would encourage states and the private sector to divest from companies that do business in Iran. This bill has bipartisan support, but for reasons that I’ll let him explain, Senator McCain never signed on," he said.

McCain told reporters he hadn't heard about Obama's bill. "I don't know if it passed the Senate or had any hearing or anything else. Literally thousands and thousands of pieces of legislation are proopsed every year."

Obama added that McCain wants to continue a war in Iraq that he said has further destabilized the U.S. and given Iran greater strength and power.

"He criticizes my willingness to use strong diplomacy, but offers only an alternate reality -- one where the war in Iraq has somehow put Iran on its heels. The truth is the opposite. Iran has strengthened its position. Iran is now enriching uranium, and has reportedly stockpiled 150 kilos of low enriched uranium. Its support for terrorism and threats toward Israel have increased. Those are the facts, they cannot be denied, and I refuse to continue a policy that has made the United States and Israel less secure," he said.

Obama hit the Bush administration for the war in Iraq, saying it has made Israel less secure. Still, he endorsed President Bush's plan for a two-state solution, the first U.S. president to articulate a roadmap for side-by-side Palestinian and Israeli states, even while suggesting the president's plan was flawed."As president, I will work to help Israel achieve the goal of two states, a Jewish state of Israel and a Palestinian state, living side by side in peace and security. And I won’t wait until the waning days of my presidency. I will take an active role, and make a personal commitment to do all I can to advance the cause of peace from the start of my administration," he said.

AIPAC's annual conference is a veritable Academy Awards of politics, with all of Washington's top politicians addressing the crowd, their entrances and exits accompanied by music and fanfare. Wednesday's session was attended by no less than Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, House Minority Leader John Boehner and Democratic presidential candidate and New York Sen. Hillary Clinton.

Clinton, whose voice cracked once under the burden of hard campaigning in the past weeks, acknowledged her rival's policy but did not mention his primary successes.

"Let me be very clear. I know that Senator Obama will be a good friend to Israel," she said to applause. She then went on to say it's imperative that Israel benefit from a Democrat in the White House next year and said McCain's policies would continue to leave the Mideast unstable.

Obama offered some key positions of support -- an undivided capital of Israel in Jerusalem, cutting off the smuggling of weapons from Egypt into Gaza, and backing of Israel's recent bombing mission that destroyed a suspected nuclear weapons site in Syria.

He said Israel also has its own responsibilities if it wants peace with its neighbors -- easing the freedom of movement for Palestinians, improving economic conditions in the West Bank and refraining from building new settlements there.

Obama said that Hamas must be isolated until the Palestinian terror group renounces terrorism, recognizes Israel’s right to exist and abides by past agreements.

"There is no room at the negotiating table for terrorist organizations. That is why I opposed holding elections in 2006 with Hamas on the ballot. The Israelis and the Palestinian Authority warned us at the time against holding these elections. But this administration pressed ahead, and the result is a Gaza controlled by Hamas, with rockets raining down on Israel," he said.

Obama said as president, he would uphold the U.S. and Israel's shared values, and his "unshakable commitment" to Israel's security. He pledged that he would implement a plan to provide $30 billion in assistance over the next decade to be used as investment in Israel's security as well as enhanced cooperation on missile defense.

"I will ensure that Israel can defend itself from any threat -- from Gaza to Tehran. ... Defense cooperation between the United States and Israel is a model of success, and it must be deepened," Obama said, adding that he would stand up for Israel's "right to defend itself in the United Nations and around the world."

Obama also said that he is a "true friend of Israel" and Jewish communities in the U.S. should not believe the e-mail campaign against him.

"I want to mention that that I know some have been receiving provocative emails that have been circulating throughout Jewish communities across the country. And a few of you may have gotten them. They’re filled with tall tales and dire warnings about a certain candidate for president. And all I want to say is, let me know if you see this guy named Barack Obama, because he sounds pretty scary," he said.