The US is preparing to designate Iran's Revolutionary Guards force as a foreign terrorist unit, officials say.
The Guards work independently of Iran's armed forces
If confirmed, this will be the first time official armed units of a sovereign state are included in the list of banned terrorist groups.
The classification would allow the US to target the force's finances.
The US has repeatedly accused Iran of destabilising Iraq and Afghanistan, blaming the Revolutionary Guards for supplying and training insurgents.
There are currently 42 organisations on the state department's list of foreign terrorist organisations.
They include al-Qaeda, the Lebanese militant group Hezbollah and the Palestinian groups Hamas and Islamic Jihad, as well as Sri Lanka's Tamil Tigers and the Basque separatist group Eta.
'Price to pay'
Administration officials told the BBC and US media that the decision to list the Revolutionary Guards was close to being announced.
The move was intended to increase the pressure on Iran amid growing concern in Washington that Tehran is funding and supporting insurgents in Iraq and the Taleban in Afghanistan, as well as groups such as Hezbollah, the officials said.
Officially the Islamic Revolution Guards Corps (IRGC), or Pasdaran
Formed after 1979 revolution
Loyal to clerics and counter to regular military
Estimated 125,000 troops
Includes ground forces, navy, air force, intelligence and special forces
Also has political influence: dozens of ex-guard sit as MPs
Iran President Ahmadinejad is a former member
The BBC's Jonathan Beale, in Washington, says the US views the Guard Corps as a state within a state, which has tentacles in business activities and is involved in Iran's nuclear programme.
Analysts were divided as to what effect the listing would have.
The terror designation "might pass in the States, but it will be resisted very strongly in countries where companies are making money with Iran", like France and Germany, Mahan Abedin, director of research at London's Centre for the Study of Terrorism, told the Associated Press agency.
But Rasool Nasisi, a Middle East analyst at Strayer University, told AFP agency: "The move would have tremendous implications... [it] is going to limit their trade with the outside the world".
Iranian MP Heshmatollah Falahatpisheh said if the US went ahead with its plans it would "meet with a very serious reaction from the Islamic Republic of Iran. This will further strengthen the Guards Corps".
Secretary of State Condoleezza Rice was behind the move to add the Guards to the list, the New York Times reported.
Ms Rice has championed a diplomatic approach to relations with Iran over the past 12 months.
But she was said to have backed the plan after progress on tougher sanctions against Iran over its nuclear programme by the UN Security Council became bogged down, the Times said.
Speaking at a news conference last week, President George W Bush hinted at a tougher stance against the Revolutionary Guards, accusing them of meddling across the Middle East.
"When we catch you playing a non-constructive role, there will be a price to pay," Mr Bush said.
The BBC News website's world affairs correspondent, Paul Reynolds, says the unanswered question is whether the new American move would be another step on a path to a military strike against Iran's nuclear facilities.
The Revolutionary Guards force was established after the Islamic revolution toppled the Shah and brought hard-line clerics to power in Iran in 1979.
It is estimated to have 125,000 active members, and operates separately from Iran's main armed forces, boasting its own ground forces, navy, air force, intelligence and special forces capability.