'The United States and India are laying the foundation for cooperation on major issues in the region and beyond, building on and building up our broader relationship between our peoples and governments,' Rice told the Senate Foreign Relations Committee.
US President George W. Bush and Indian Prime Minister Manmohan Singh signed the agreement in India in March, but it must be approved by a sceptical Congress.
The agreement has generated criticism over concerns that it could lead to the proliferation of nuclear technology and materials and because India is not a member of the nuclear Non-Proliferation Treaty and has a nuclear weapons programme.
Under the deal, India is required to separate its civilian and military nuclear activities, allowing international monitoring of reactors producing electricity but not those involved with nuclear weapons.
Arms control experts have criticized the deal because it does nothing to contain India's nuclear weapons arsenal, and because it sends the wrong signal to countries like North Korea and Iran, two countries suspected of having nuclear weapons programmes.
'We must not encourage rogue states - and I know that's not your intention and I stress that India is not a rogue state - by creating the sense that we only oppose proliferation until it succeeds, and then make our peace with the new nuclear power,' said Senator Joseph Biden, the ranking Democrat on the committee.
India is one of the fastest growing countries countries in Southeast Asia, and after decades of estranged relations with Washington during the Cold War, the United States and India have forged strong economic ties. Washington also views India's emergence as a counterweight to China.
Rice warned that past policies to isolate India did not prevent it from obtaining nuclear weapons, and said that it was time for a different approach that would bring India into the international fold and allow the UN nuclear watchdog, the International Atomic Energy Agency (IAEA) to conduct inspections.
'It is entirely clear now that those past nonproliferation policies did not achieve their goals,' Rice said. 'In fact, they had no effect on India's development of nuclear weapons.'
Rice rebuffed suggestions that the deal contradicted US policy aimed at Iran and North Korea from developing nuclear arsenals, and said that India has a solid record when it comes to non- proliferation.
'While Iran and North Korea are violating their IAEA obligations, India is making new obligations by bringing the IAEA into the Indian programme and seeking peaceful international cooperation,' Rice said.
She also credited India for supporting a resolution on the IAEA's governing board earlier this year referring the nuclear dispute with Iran to the UN Security Council.
Republican Senator Richard Lugar, the chairman of the committee, acknowledged the criticism of the deal and agreed that it did little to slow India's nuclear weapons programme, but said he would support the agreement because it brings India closer to international norms.
'For too long during the past half century, during the Cold War in particular, because of both domestic policies and foreign policies, India and the United States were estranged,' Lugar said. 'And one element of this estrangement was India's complete isolation from the policies that the United States was concerned about, concerning proliferation of weapons of mass destruction.'
Rice was to discuss the subject with the House International Relations Committee later on Wednesday.
