Because of the war in Iraq, he said, "Iran, which always posed a greater threat to Israel than Iraq, is emboldened, and poses the greatest strategic challenge to the United States and Israel in the Middle East in a generation."
"Iraq is unstable," Obama said in a long-scheduled speech to the American Israel Public Affairs Committee, a major Jewish bipartisan group. "And al-Qaida has stepped up its recruitment."
Israel's peace efforts have stalled, he said, "and America is more isolated in the region, reducing our strength and jeopardizing Israel's safety."
"As president I will never compromise when it comes to Israel's security," he told the crowd of 7,000.
McCain, President Bush and some Democrats have criticized Obama for saying he would talk with leaders of hostile governments, and they say he underestimates the threat posed by Iran. Such attacks could pose problems for Obama in key states such as Florida, home to many Jewish voters, some of whom question his commitment to Israel.
Obama used the occasion to outline his limits on negotiations with adversaries.
"We must isolate Hamas unless and until they renounce terrorism, recognize Israel's right to exist, and abide by past agreements," he said of the Palestinian group opposed to Israel. "There is no room at the negotiating table for terrorist organizations."
"Contrary to the claims of some, I have no interest in sitting down with our adversaries just for the sake of talking," Obama said. But if elected, he said, "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."
"I will always keep the threat of military action on the table to defend our security and our ally Israel," he said.
When McCain addressed the AIPAC group Monday, he ridiculed Obama for suggesting he would sit down with Iranian President Mahmoud Ahmadinejad.
Obama said Wednesday there is no greater threat to Israel than Iran, which "supports violent extremists" and "pursues a nuclear capability that could spark a dangerous arms race." All those threats were known in 2002, he said, yet the Bush administration "ignored it and instead invaded and occupied Iraq."
He said McCain "refuses to understand or acknowledge the failure of the policy that he would continue. 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."
Obama was followed on stage by Sen. Hillary Rodham Clinton, whom he had warmly praised. She did not formally concede the nomination to him but told the audience that Obama "will be a good friend to Israel."
Some Jewish voters are wary of Obama partly because his former pastor praised Black Muslim leader Louis Farrakhan, who has made anti-Semitic remarks. Obama has disavowed the pastor's intemperate remarks and later resigned from that church.
Obama also cited e-mails "filled with tall tales and dire warnings about a certain candidate for president," a reference to false accusations that he is a Muslim with a hidden agenda. "Let me know if you see this guy named Barack Obama, because he sounds pretty scary," he said.
Obama clearly impressed some in the massive hall.
"He had me in tears, this feeling for an understanding of Israel's predicament," said Leonard Eisenfeld, a Connecticut pediatrician whose son was killed in a Hamas bus bombing in Jerusalem in 1996. He said he respects McCain, but is now more open to Obama, calling him a "good soul" in Yiddish.
But Evelyn Mottsman of Pittsburgh said it "disturbs a lot of people that he thinks diplomacy is possible" with Iran.
And one Palestinian official expressed dismay because Obama "said that Jerusalem would remain undivided as the capital of Israel."
"If he means that, that means closing all doors for peace," Palestinian negotiator Saeb Erekat told The Associated Press in Jerusalem. "We had hoped that under the banner of change, Mr. Obama would have said that east Jerusalem would be the capital of the Palestinian state."
