"America cannot solve the most pressing problems on our own, and the world cannot solve them without America," said the New York senator.
"We must use what has been called 'smart power', the full range of tools at our disposal," she added.
"With 'smart power', diplomacy will be the vanguard of foreign policy."
On North Korea, she indicated that she and Mr Obama support the existing six-party framework for negotiating that country's nuclear disarmament.
North Korea, South Korea, China, Japan, Russia and the US are involved in continuing talks on ending Pyongyang's plutonium enrichment.
"Our goal is to end the North Korean nuclear programmes," she told the hearing.
The six-party framework, she added, "provides an opportunity... for bilateral contact as well between North Korea and the United States".
Mrs Clinton was greeted warmly by her ex-colleagues at the Senate hearing.
Mrs Clinton's confirmation hearing has attracted significant media interest
But the former first lady was also asked questions about conflicts of interest triggered by her husband, former President Bill Clinton.
Mr Clinton's charitable foundation has received a number of donations from foreign governments and multinational corporations.
Richard Lugar, the most senior Republican on the Senate panel, said the existence of Mr Clinton's foundation represented a "unique complication" that required "great care and transparency".
And Louisiana Senator David Vitter said Mr Clinton's fundraising activities posed "real and perceived conflict issues" for Mrs Clinton.
The BBC's James Coomarasamy in Washington says the atmosphere in the committee room was collegial and that on many issues, Mrs Clinton expressed views that were not dissimilar to those of the Bush administration.
The vote on the nomination is scheduled for Thursday, a sign that the committee's chairman, Senator John Kerry, does not expect there to be any stumbling blocks, correspondents say.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.