Iranian media say the country has successfully launched its first rocket capable of reaching space.
But officials said it was just for research and would not go into orbit.
Experts say if Iran has fired a rocket into space it would cause alarm abroad as it would mean scientists had crossed important technological barriers.
Iran has made little secret of its desire to become a space power and already has a satellite in orbit launched by the Russians.
The latest launch - if confirmed - comes at a time of mounting tension between Tehran and the West over Iran's controversial nuclear programme.
The five permanent members of the UN Security Council and Germany are due to meet on Monday to discuss the possibility of more sanctions over the nuclear issue.
On Sunday, President Mahmoud Ahmadinejad delivered another defiant speech insisting there is no going back on Iran's nuclear programme.
In a speech in Tehran, he likened his country's nuclear programme to a train with no brakes and no reverse gear.
One of his deputy foreign ministers, Manouchehr Mohammadi, said they had prepared themselves for any situation arising from the issue, even for war.
Meanwhile, foreign ministers from seven Muslim states meeting in Pakistan have called for a diplomatic solution to the "dangerous" stand-off.
"It is vital that all issues must be resolved through diplomacy and there must be no resort to use of force," said a statement issued after talks involving ministers from Egypt, Indonesia, Jordan, Malaysia, Pakistan, Saudi Arabia and Turkey.
Missile technology
Iranian TV broke the news of the reported test saying: "The first space rocket has been successfully launched into space."
It quoted the head of Iran's aerospace research centre, Mohsen Bahrami, as saying that "the rocket was carrying material intended for research created by the ministries of science and defence".
However, Ali Akbar Golrou, executive director of the same facility, was later quoted by Fars news agency as saying the craft launched by was a sub-orbital rocket for scientific research.
"What was announced by the head of the research centre was the news of launching this sounding rocket," Mr Golrou said.
It would not remain in orbit but could rise to about 150km (94 miles) before a parachute-assisted descent to Earth.
No pictures of the reported launch have been shown on Iranian state TV, and no Western countries have confirmed tracking any such test-firing.
Some Western diplomats suspect Iran may have backtracked on the announcement when it realised what negative publicity this would bring at a sensitive time, says the BBC's Frances Harrison in Tehran.
The reports come a day after Iran's Defence Minister spoke of plans to build a satellite launcher and join the space club. Also, an Iranian official quoted in Aviation Week earlier this month said Iran would soon test a new satellite launcher.
Britain's former ambassador to Iran, Sir Richard Dalton, told the BBC that, if confirmed, such a launch could destabilise the Middle East.
"It is a matter of concern," he said. "Iran's potential nuclear military programme, combined with an advanced missile capability, would destabilise the region, and of course if there were a bomb that could be placed on the end of this missile, it would in breach of Iran's obligations under the non-proliferation treaty."
Military experts believe that if Iran has sent a rocket into space it means scientists have mastered the technology needed to cross the atmospheric barrier.
In practice, they say, that means there is no technological block to Iran building longer range missiles now, something that will be of great international concern.
In 2005, Iran's Russian-made satellite was put into orbit by a Russian rocket.
But shortly afterwards Iranian military officials said they were preparing a satellite launch vehicle of their own, and last month they announced they were ready to test it soon.
Sunday, February 25, 2007
Iran fires 'first space rocket'
Feb 25 2007 BBC report: Iran fires 'first space rocket':
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