In a one-hour speech to the nation in which he appeared confident and relaxed, Assad ignored international demands for him to step down and said he is ready to hold a dialogue but only with those "who have not betrayed Syria." He offered a national reconciliation conference, elections and a new constitution but demanded regional and Western countries stop funding and arming rebels trying to overthrow him first.
The proposal, however, is unlikely to win acceptance from Syria's opposition forces, including rebels on the ground, who have repeatedly said they will accept nothing less than the president's departure, dismissing any kind of settlement that leaves him in the picture. On top of that, Assad's new initiative is reminiscent of symbolic changes and concessions that his government made earlier in the uprising, which were rejected at the time as too little too late.
Speaking at the Opera House in central Damascus, Assad told the hall packed with his supporters that "we are in a state of war. We are fighting an external aggression that is more dangerous than any others, because they use us to kill each other."
"It is a war between the nation and its enemies, between the people and the murderous criminals," he added. The audience frequently broke out in cheers and applause.
Assad has rarely spoken since the uprising against his rule began in March 2011, and his speech Sunday was his first since June.
His last public comments were in an interview in November to Russian TV in which he vowed to die in Syria. On Sunday, he seemed equally confident in his troops' ability to crush the rebels fighting his rule, even as they edge in closer than ever to his seat of power, Damascus.
British Foreign Secretary William Hague said Assad's speech was "beyond hypocritical." In a message posted on his official Twitter feed, Hague said "empty promises of reform fool no one."
Wearing a suit and tie, the president spoke before a collage of pictures of what appeared to be Syrians who have been killed since March 2011.
At the end of his speech and as he was leaving the hall, he was mobbed by a group of loyalists shouting: "With our blood and souls we redeem you, Bashar!"
The president in turn waved and blew kisses to the crowd on his way out.
Assad, in his speech, acknowledged the enormous impact of the nation's conflict, which the United Nations recent estimated had killed more than 60,000 people.
"We meet today and suffering is overwhelming Syrian land. There is no place for joy in any corner of the country in the absence of security and stability," he said. "I look at the eyes of Syria's children and I don't see any happiness."
The Internet was cut in many parts of Damascus ahead of the address, apparently for security reasons.
As in previous speeches, Assad said his forces were fighting groups of "murderous criminals" and jihadi elements and denied that there was an uprising against his family's decades-long rule.
He stressed the presence of religious extremists and jihadi elements among those fighting in Syria, calling them "terrorists who carry the ideology of al-Qaeda" and "servants who know nothing but the language of slaughter."
He struck a defiant tone, saying Syria will not take dictates from anyone and urged his countrymen to unite to save the nation.
Outlining his peace initiative, he said: "The first part of a political solution would require regional powers to stop funding and arming (the rebels), an end to terrorism and controlling the borders."
He said this would then be followed by dialogue and a national reconciliation conference and the formation of a wide representative government which would then oversee new elections, a new constitution and general amnesty.
However, Assad made clear his offer to hold a dialogue is not open to those whom he considers extremists or carrying out a foreign agenda.
"We never rejected a political solution ... but with whom should we talk? With those who have extremist ideology who only understand the language of terrorism?" he said.
"Or should we with negotiate puppets whom the West brought? ... We negotiate with the master not with the slave."
As in previous speeches and interviews, he clung to the view that the crisis in Syria was a foreign-backed agenda and said it was not an uprising against his rule.
"Is this a revolution and are these revolutionaries? By God, I say they are a bunch of criminals," he said.
