"You pull away the gun from the face of the Iranian nation, and I myself will enter the talks with you," Ahmadinejad said at a ceremony marking the 34th anniversary of the 1979 revolution that toppled a Western-backed monarch and ushered in the Islamic Republic.
He said the West had recently taken a "better" tone toward Iran a nod to statements made by Vice President Joe Biden last week, in which he said the United States was prepared talk directly to Iran. But the Iranian president said this was not enough.
The West claims Iran's nuclear activities are aimed at developing weapons. Iran denies it seeks atomic arms, saying its nuclear fuel is only for energy-producing reactors and medical applications, and insists that its operations will continue.
"The Iranian nation will not give up one iota of its rights," Ahmadinejad said. "Your efforts had aimed at preventing us from [becoming] nuclear, but we did."
However Ahmadinejad admitted that sanctions have taken a bite. "Today, because of dishonorable pressure by enemies, people are under pressure. The government is concerned about the uneasy situation of a big portion of the country."
Ahmadinejad also said Iran will soon send a satellite into geostationary orbit.
"God willing, soon Iran's satellite will be located at an orbit at (an altitude of) 22,000 miles next to others from four or five advanced powers and it will relay a message of peace and fidelity to all world," said Ahmadinejad.
Iran regularly announces technological breakthroughs, most of which are impossible to verify independently. Iran says it has launched small satellites to low orbits of up to 280 miles. In January, Iran claims it sent a monkey into suborbital space and recovered the animal safely. It says it hopes to send astronauts to orbit by 2018.
Iran displayed a model of the Pishgam rocket, which the country says it used to send the monkey into space, in a corner of Tehran's Azadi Square where demonstrators gathered to listen to the president.
The West fears that Iran's space program can be used to develop long-range missiles.
State TV, meanwhile, broadcast rallies throughout the country to mark the anniversary. Many demonstrators chanted "Down with the U.S." and "Death to Israel," slogans traditionally used to denounce the Islamic Republic's arch-enemies.