Clinton was speaking to students at a Qatar university during a tour of the region.
She said, "Iran's elite military force, the Revolutionary Guard, is in effect, supplanting the government."
"We see the government of Iran, the supreme leader, the president, the parliament is being supplanted and Iran is moving toward a military dictatorship," Clinton said.
Clinton further said, "US wants a peaceful solution to the nuclear controversy with Iran, but will not engage the Iranians while they are building their bomb."
Clinton's statements come as she tours the Gulf region to promote efforts to increase pressure against Iran for its nuclear program.
On Feb 11, Iran had announced that it has produced a first batch of uranium enriched to a level of 20 percent.