Gaddafi hailed what he called "positive signals" so far from the new Obama administration, including plans to close the US prison at Guantanamo Bay, Cuba.
A video grab from an undated footage from the Internet shows al-Qaeda leader Osama bin Laden making statements from an unknown location.
Speaking to students at Georgetown University via a satellite link-up from Libya, Gaddafi said Washington must review its approach to bin Laden, who is blamed for the September 11, 2001 attacks and tops the US Most Wanted List.
"Terrorism is a dwarf not a giant. Osama bin laden is a person who can be given a chance to reform," Gaddafi said through an interpreter. He gave no indication that he had any contact with bin Laden or wanted to act as a go-between.
"Maybe we can have a dialogue with him and find out the reason that led him in this direction," he added.
Moreover, he said the Taliban, which the United States helped oust in Afghanistan, was "not as it has been portrayed" and Washington should review its views on that group too.
In a speech outlining his views on how to resolve the Israeli-Palestinian conflict, Gaddafi called for the creation of one state rather than two nations living side by side.
"We can call it Isratine," he said.
If Jews did not accept a one-state solution, he said they could move to Hawaii, Alaska or an island in the Pacific. "They could live peacefully in an isolated setting."