"I think you've heard it said by pundits that Iran has gone from being a theocracy to a thugocracy," Petraeus, whose command stretches from Egypt to Pakistan and includes Iran, said on CNN's "Fareed Zakaria GPS."
"And that is again because of the emergence of this reform movement of the citizens who are outraged at the hijacking of the election that took place back last summer."
Iran has executed protesters who took to the streets to demonstrate against the presidential election in June 2009 that saw Mahmoud Ahmadinejad returned to power despite widespread allegations of fraud.
The use of force against activists as well as Tehran's continued enrichment of uranium in defiance of international entreaties have isolated a regime that has repeatedly spurned offers of engagement from President Barack Obama.
Petraeus said it was not clear whether Tehran had definitively decided to pursue nuclear weapons, as many Western nations fear.
But he said such a decision was "a little bit immaterial at this point in time, because all of the components of a program to produce nuclear weapons... have been proceeding."
Asked whether a nuclear Iran could be contained, Petraeus said, “First of all you have to ask the country that is most directly concerns about this, and that would be Israel.”
In the gulf states, Petraeus said, “There’s almost a slight degree of bipolarity there at times. On the one hand there are countries that would like to see a strike – perhaps Israeli– there’s the worry that someone will strike. And then there’s the worry that someone won’t strike.”
The United States is working with its UN Security Council veto-wielding partners - France, Britain, China and Russia - as well as Germany, to come up with new sanctions against Iran. Tehran maintains its nuclear program is for peaceful purposes only.
In the past, Washington has struggled to convince Russia and China to back sanctions, but Moscow switched course recently after a new Iranian nuclear site was revealed.
Petraeus said Iranian actions were making it easier for the United States to build a coalition and added: "President Ahmadinejad is often our best recruiting officer."