The world's growing dependence on petroleum to fuel economic development ensures that a stable Persian Gulf will continue to be a vital American interest. Iran, due to its large population, abundant natural resources and geographic position demands Washington's full attention. The Clinton administration has chosen to reverse the Bush policy practice of rewarding Iran for good behavior and has instead embarked on a confrontational course with Tehran through a policy of containment. This thesis provides an examination of U.S. - Iranian security perspectives, a discussion of internal Iranian and regional dynamics, and analysis several alternative American policy proposals. The argument advanced in this study is that the United States can better influence Iranian behavior engaging Iran politically and economically. The author reaches the conclusion that the United States and Iran share many strategic and economic interests. It is recommended that America pursue these shared interests, from its current position of strength and gain Iran's cooperation on important issues. Constructive engagement with Iran would strengthen the pragmatic elements in the government, foster economic development and improve the security and stability of the region.