Iran's hardline Islamic government faces increasing pressure from within to adopt democratic reforms as other countries in the region hold elections, expand the right to vote and write new constitutions, Secretary of State Colin Powell said.

Iran's state-run radio on Tuesday criticized Powell's remarks, calling them "extremely offensive."

Powell said the intense desire for change in Iran was obvious by the large crowds that greeted this year's Nobel Peace Prize winner, Shirin Ebadi (search), when she returned to her homeland last month.

"The Iranian people want their freedom back, of this there can be no doubt," he said during a speech Monday at the City College of New York (search).

That freedom, Powell said, doesn't have to come at the expense of religion in their conservative Islamic society.

"They do not want to banish Islam from their lives. Far from it," he said. "They want to be free of those who have dragged the sacred garments of Islam into the political gutter."

Iranian radio was quick to dismiss Powell's speech.

"In extremely offensive remarks, he criticized the rule of religion in Iran," the radio said, according to a translation by the British Broadcasting Corp. "Colin Powell has spoken against Iran on many occasions, but this is the first time that he has worn the cloak of an Islamologist to criticize the Islamic Republic of Iran."

Powell's remarks come amid a debate on whether the Bush administration should soften its tough line with Iran, which was included with Saddam Hussein's Iraq and North Korea among the "axis of evil" in the president's 2002 State of the Union address.

The Bush administration believes Iran is trying to develop atomic weapons and should be declared in violation of the Nuclear Nonproliferation Treaty (search).

Diplomats told The Associated Press on Monday that a confidential U.N. nuclear agency report has found no evidence to support U.S. claims that Iran tried to make atomic arms, but it cannot rule out the possibility because of past cover-ups by Tehran.

Powell did not address the nuclear issue in his speech marking the centenary of Ralph Bunche, an educator and diplomat who received the Nobel Peace Prize in 1950.

As examples of the trend toward democracy in the Muslim world, Powell cited the drafting of a new constitution and planned elections in Afghanistan, where a U.S.-led coalition ousted the Taliban regime in late 2001.

Powell also said "we are working as hard and fast as we can" to prepare for the return of Iraq's sovereignty after the U.S.-led war. He acknowledged the difficulty of the task amid attacks by forces loyal to the ousted regime.

"There is no question that we are being tested in Iraq," Powell told an audience of several hundred at City College, from which he graduated in 1958. "We're being tested politically as well as militarily. It is a test that we must and will win."

Still, democracy is advancing in the Islamic world, he said.

Jordan held parliamentary elections this summer, the first in six years. Qatar has a new constitution. Oman extended the vote to all adult citizens. Bahrain now has an elected parliament.

There is a multiparty political system "taking root" in Yemen and Saudi Arabia has agreed to elections for local city councils, though it has set no date.

"There is nothing inherent in Islam that is antidemocratic, that is anti-freedom," he said, noting that the majority of the world's 1.3 billion Muslims live in countries that are democratic or heading in that direction.

Iran has an elected parliament, but ultimate authority resides with the religious leadership.

But Powell said the people long for greater liberty.

"When Shirin Ebadi returned home to Iran just a week or so ago ... tens of thousands of Iranians came out to greet her," he said. "We all know what this means.... The hidebound clerics of Iran know what it means, too. Should they be worried? Does morning follow night? They should be."