In his State of the Union speech Mr Bush told Congress: "We will consult, but let there be no misunderstanding - if Saddam Hussein does not fully disarm for the safety of our people, and for the peace of the world, we will lead a coalition to disarm him."

The dictator of Iraq is not disarming - to the contrary, he is deceiving George W Bush

Click here for full text of the speech

He listed a number of banned weapons Iraq had failed to account for and accused President Saddam Hussein of lying to the world.

BBC Washington correspondent Justin Webb says the address was not quite a declaration of war - but it came close.

The question on everyone's lips was whether or not Mr Bush was preparing his people for war. Our correspondent says the answer seems to be yes.

In the address, the US president also highlighted domestic issues - including the economy, taxes, and healthcare.

Click here to watch the State of the Union address with clickable highlights

Although there are nearly two years to go before the next presidential election, analysts say Mr Bush's performance could be vital in reversing a downward trend in his popularity.

In their response, the opposition Democrats have criticised the president's economic plans - but supported him on Iraq.

"Almost three months ago, the United Nations Security Council gave Saddam Hussein his final chance to disarm," Mr Bush said.

KEY DATES

29 January: Security Council meets to discuss weapons inspectors' report 31 January: Bush-Blair summit 5 February 2003: US to present evidence on Iraqi arms to Security Council 14 February: tentative date set for further inspectors' briefing 27 March: Chief weapons inspector to present next report

"He has shown instead his utter contempt for the United Nations, and for the opinion of the world.

"The dictator of Iraq is not disarming. To the contrary, he is deceiving."

Mr Bush announced that he would ask the United Nations Security Council to meet on 5 February to consider "Iraq's ongoing defiance of the world".

He said Secretary of State Colin Powell would present intelligence about Iraq's weapons programs, "its attempts to hide those weapons from inspectors, and its links to terrorist groups".

Our diplomatic correspondent Barnaby Mason said the question now is whether America's evidence about alleged Iraqi weapons of mass destruction turns out to be detailed, new or convincing.

"Most intriguing is whether the Bush administration can give substance to its vague charge of links between the Iraqi regime and al-Qaeda," he said.

"But in any case, the President's speech makes it clearer than ever that he is already in wartime rhetorical mode."

Wide agenda

In his hour-long address, Mr Bush touched on a range of foreign and domestic policy issues.

• The war on terror: "We have the terrorists on the run."
• North Korea's nuclear programme: "America and the world will not be blackmailed."
• Aids: $15bn over five years to help fight Aids in Africa and the Caribbean.
• Lower taxes to stimulate the economy.
• Health care: "we must work toward a system in which all Americans have a good insurance policy."
• The environment: $1.2bn towards research on hydrogen-powered cars.
• Help for faith-based charities assisting the poor.

Constructive criticism

In their response to the speech, the Democrats attacked the president's economic plan.

[The president] shall from time to time give to the Congress information of the State of the Union, and recommend to their consideration such measures as he shall judge necessary and expedient US Constitution

Click here for more about the State of the Union address

"We think it's upside down economics," Washington state Governor Gary Locke said on behalf of the minority Democrats.

"It does too little to stimulate the economy now and does too much to weaken our economic future," he said.

The Democrats have opposed President Bush's plan to cut taxes on shareholders' dividends, saying the move would favour the wealthy.

However on Iraq and nuclear proliferation Mr Locke backed the president - although he stressed the need for international consultation.

"We also support the president in working with our allies and the United Nations to eliminate the threat posed by Saddam Hussein and Kim Jong-il of North Korea," Mr Locke said.

"We support the president in the course he has followed so far - working with Congress, working with the United Nations, insisting on strong and unfettered inspections."