European nations have welcomed a US offer of conditional talks with Iran to try to resolve the nuclear stand-off.
Western powers suspect Iran's nuclear ambitions are not peaceful
The US said it was ready to join EU states in talks if Iran halted uranium enrichment and reprocessing work, in a move seen as a major policy change.
However, Iran's state-run news agency dismissed it as a "propaganda move".
The offer comes as the world's major powers are due in Vienna to discuss a package of incentives to persuade Iran to suspend its controversial programme.
Foreign ministers from Germany and the five permanent UN Security Council members - Britain, China, France, Russia and the US - will try to finalise the package, which also includes potential punishments if the Iranians refuse to comply.
Tehran says its nuclear activities are aimed at energy production.
The US and Western allies suspect Iran of trying to build a nuclear weapon.
Responding to the US offer, EU foreign policy chief Javier Solana said it represented the "strongest and most positive signal of our common wish to reach an agreement with Iran".
British Foreign Secretary Margaret Beckett said the proposal would give "added weight" to the package to be discussed in Vienna.
Without commenting directly on the US offer, Russian Foreign Minister Sergei Lavrov said he hoped the "way will be open to a political solution" after the Vienna meeting.
The Chinese envoy to the UN, Wang Guangya, also welcomed the announcement, but urged the US "not have any preconditions" for talks.
Both Russia and China have opposed UN sanctions against Iran.
The offer was also backed by the UN nuclear watchdog.
On Wednesday, US Secretary of State Condoleezza Rice said "as soon as Iran fully and verifiably suspends its enrichment and reprocessing activities, the United States will come to the table".
Ms Rice urged Iran to consider the new proposals
The move was to show US commitment to a diplomatic solution and "to enhance the prospects for success", she said in a statement.
Ms Rice also urged Iran to "thoroughly consider" the incentives currently being agreed by the US and EU nations aimed at persuading Tehran to abandon its nuclear plans.
Ms Rice recognised Iran's right to a civilian nuclear programme, but condemned what she called Iran's support for terror.
When asked about the possibility of pursuing a military option against Iran, she said President George Bush "was not going to take any of his options off the table".
Speaking to journalists after Ms Rice's statement, Mr Bush said America was ready to take a leadership role on the issue.
Washington broke off diplomatic ties with Iran in 1979 and the two sides have had little official contact since.
Analysts believe that in one bold move Washington has regained the diplomatic advantage, with the onus now on the Iranians to respond.