Iranian television said the medium-range missile test had been successful
Iran has successfully test-fired an improved version of a medium-range missile, state television has said.
TV pictures showed the launch of the Sajjil-2 rocket, which experts say has the range to be able to hit Israel and US bases in the Gulf.
Correspondents say it is not the first time this missile has been tested, but the timing is likely to add to current tension over Iran's nuclear ambitions.
The West says Iran is trying to build nuclear weapons, a charge Iran denies.
The US said the test "undermined Iran's claims of peaceful intentions".
"Such actions will increase the seriousness and resolve of the international community to hold Iran accountable for its continued defiance of its international obligations on its nuclear programme," a White House spokesman said.
UK Prime Minister Gordon Brown said the missile launch could boost the likelihood of further sanctions against Iran.
MAXIMUM MISSILE RANGE
Sajjil-1 and 2: 2,000km
Zelzal: up to 400km
Sources: GlobalSecurity.org, AFP, Jane's, Arms Control Association
"This is a matter of serious concern to the international community and it does make the case for us moving further on sanctions," he said.
The French Foreign Ministry said the launch was "very worrying".
"A test of this kind can only strengthen the international community's worries at a time that Iran is also developing a nuclear programme with no identifiable civil objective in violation of five United Nations Security Council resolutions," spokesman Bernard Valero said.
In September, Iran was heavily criticised after testing its Sajjil and Shahab missiles which could travel 2,000km (1,243 miles).
Those tests came just weeks after Iran revealed the existence of a previously secret nuclear facility in the mountains near the city of Qom.
Like the missiles tested in September, the missile launched on Wednesday uses solid fuel in its two-stage rocket.
Solid fuel rockets can be prepared for launch in less time than those using liquid propellant rockets.
BBC defence correspondent Nick Childs says the government's refinements to its rocket programme will increase tensions over Iran's nuclear ambitions.
The six nations negotiating with Iran on that issue want to prevent the government from enriching uranium to weapons-grade.
Iran has declared it will open 10 more nuclear sites and enrich uranium to a higher degree than it has publicly announced before.
The latest test-firing comes on the same day that Iran's judiciary announced it had evidence that opposition leaders had tried to foment anti-government tension on the streets following disputed elections in June.
The announcement by judiciary chief Sadeq Larijani is seen as an indication that opposition leaders may be about to be arrested.
Hundreds of protesters have been detained and five have been sentenced to death by courts.
Protests have continued and Iran accuses the reformists of being influenced and aided by the West.
The missile launch may be an attempt to distract attention from plans to arrest the opposition leaders, correspondents say.
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