Meanwhile, the US formally acknowledged its obligations under the Geneva Convention as an occupying power in Iraq.
Military officers at the US Army's V Corps in Baghdad said the Mujahedeen Khalq, a longtime Iranian opposition group that operated in Iraq with Saddam Hussein's blessing, had been surrounded by US forces northeast of the capital. The officers spoke on condition of anonymity.
The Mujahedeen Khalq, or People's Warriors, has several camps near Baqubah, 45 miles from Baghdad. US troops were prepared for full-scale combat but were negotiating with members of the group yesterday, the officials said.
The United States signed a truce on April 15 with the Mujahedeen Khalq, allowing the group to keep its weapons to defend itself against Iranian-backed attacks.
But reports of roadblock confrontations outside Baqubah in recent days suggest the group is still playing an active and armed role in the region something the United States could perceive as a challenge to its authority as Iraq's military occupier.
Iran's clerical government has criticised US policy toward the mujahedeen, saying it was hypocritical of the US to describe the group as terrorist yet still sanction its existence.
In the past, the United States called the Mujahedeen Khalq a terrorist organisation. During the 1970s, the group was accused in attacks that killed several US military personnel and civilians working on defence projects in Iran, although the group denies targeting Americans. It reportedly backed the takeover of the US Embassy in Tehran in 1979 but later broke with Iran's government.
If Iran acquires nuclear weapons, neighbouring countries would probably follow suit, senior American officials believe.
The administration is attempting to call attention to Iran's nuclear activities, and is hoping that international pressure will induce Tehran to reverse course.
But Iran hit back at US accusations that it is accelerating its nuclear weapons programme and pledged to allay concern by working closely with the UN's nuclear watchdog, the International Atomic Energy Agency (IAEA).
An Iranian foreign ministry official acknowledged at international arms control talks here that some countries had voiced concern about his country's nuclear programme "in good faith".
"It is our responsibility to respond to them and to allay concern," the official, Amir Zamaninia, said.
But he rejected heightened US pressure on Iran during the talks on the nuclear Non Proliferation Treaty (NPT) over the past two weeks as "double standards" and said Washington's statements should "be taken with a pinch of salt."
"They clearly point to the fact that the US views Iran's nuclear programme from the prism of bilateral relations that has a backdrop of more than 20 years of divergence, to say the least," Zamaninia, director-general of international political affairs, said.
"With nuclear weapons, Iran becomes a threat for all of its neighbours," a senior administration official said Thursday. "It would be highly destabilising in the region. Others could potentially be impelled to also seek such weapons."
Saudi Arabia, no friend of Iran, is seen as the country best positioned to follow Iran into the nuclear weapons camp.
The United States believes that Iran, notwithstanding its denials, is engaged in developing plutonium- and uranium-based nuclear weapons. Washington is looking to the IAEA, to call Iran to account.