His remarks were condemned by pro-democracy activists who vowed that the "revolution" -- now in its fourth month -- must go on.
US State Department spokeswoman Victoria Nuland said: "What is important now is action, not words. A speech is just words."
European foreign ministers agreed to beef up sanctions on the embattled president over his regime's deadly crackdown on protests, with some calling on him to reform or "step down."
|A handout picture released by the official Syrian Arab News Agency (SANA) shows Syria's President Bashar al-Assad addressing the nation from Damascus University in the Syrian capital|
Assad acknowledged in his televised speech that Syria had reached a "turning point," but said dialogue could lead to a new constitution and end nearly five decades of Baath party dominance -- a key opposition demand.
Reform was "a total commitment in the interest of the nation," he added in his third speech to the nation since the protests began in mid-March.
Assad offered condolences to the families of "martyrs" killed in the unrest rocking the country, but said there could be "no development without stability, no reform in the face of sabotage and chaos."
"We make a distinction between those (with legitimate grievances) and the saboteurs who represent a small group which has tried to exploit the goodwill of the Syrian people for its own ends," he said.
But Nuland charged that the Syrian regime "supports itself through repression, corruption and fear" and rejected Assad's contention that the protest movement was the work of foreign instigators.
"We're just not buying it," she said.
Witnesses and opposition activists said Assad's speech was followed by protests in many parts of Syria, including the northern city of Aleppo, the central regions of Homs and Hama and in Damascus suburbs.
"The protesters condemned the speech which branded them as saboteurs, extremists," the head of the London-based Syrian Observatory for Human Rights, Rami Abdel Rahman, told AFP by telephone.
Sixty 60 demonstrators were arrested in Aleppo over the past 24 hours, he said.
His group says the violence has so far claimed the lives of 1,310 civilians and 341 security force members.
Opposition activists said Assad's speech failed to specify concrete steps -- namely the pullout of troops from besieged cities -- and only deepened the crisis.
The Coordination Committee, an umbrella group of activists, called for "the revolution to carry on until all its aims have been achieved."
"We consider any dialogue useless that does not turn the page on the current regime," it said in a statement received by AFP.
Prominent human rights lawyer Anwar al-Bunni, who was freed from five years in prison last month, called Assad's speech "disappointing."
"The key demands made by the people were not mentioned and the existence of a political crisis has been ignored," he said.
British Foreign Secretary William Hague said on Twitter: "Little new on how reforms will be implemented & when, or how he will end violence."
French Foreign Minister Alain Juppe said in Luxembourg: "Some believe that there's still time for him to change his ways and commit to a (reform) process. For my part, I doubt it. I think that the point of no return has been reached."
And German Foreign Minister Guido Westerwelle said of Assad: "He seems not to have understand the signs of the times."
EU foreign ministers agreed a resolution that the European Union was "actively" preparing to "expand its restrictive measures by additional designations with a view to achieving a fundamental change of policy by the Syrian leadership without delay."
It also said Assad's "credibility and leadership depend on the implementation of the reforms he himself announced."
The EU has been looking at adding firms and a dozen people to a blacklist of 23 people targeted by an asset freeze and travel ban which already includes Assad and key allies.
Western governments have also been circulating a draft UN Security Council resolution that would condemn Assad's crackdown on dissent, but Russia warned it would veto any such move.
Russian President Dmitry Medvedev told the Financial Times that he feared the text would be used as cover for Libya-style military action.
Meanwhile, as International Committee of the Red Cross chief Jakob Kellenberger began a two-day trip to Syria, the authorities took diplomats and journalists to what they said was the site of a mass grave of people killed by "armed groups."
The third such "mass grave" near the restive northern town of Jisr al-Shughur, the focus of military operations since June 12, contained at least 29 bodies, a Syrian military source told AFP.