"The talks should continue tomorrow," said the source, who asked not to be identified.

But the source said Thursday evening's meeting between Iranian negotiators and the ambassadors of Britain, France and Germany "took place in a very positive atmosphere.

"We can hope for an imminent result, or otherwise a quick result," the source said, without saying what was holding up an agreement.

Iran is supposed to give its response to demands it halt its uranium enrichment in order to avoid possible UN sanctions. The terms of a preliminary accord were hammered out during two days of tough negotiations in Paris last week.

The Europeans are pushing for Iran to accept a suspension of its work on the nuclear fuel cycle, including enrichment, to ease international alarm over what the United States alleges is a covert weapons drive.

In return, Europe's three major powers are offering Iran civilian nuclear technology, including access to nuclear fuel, increased trade and help with Tehran's regional security concerns.

The International Atomic Energy Agency, which has been probing Iran for nearly two years, has told the country it must respond this week in writing to the European deal if it wants its position included in a report for an IAEA meeting in Vienna on November 25.

"The IAEA is under the obligation to issue its report in a time frame pretty much two weeks before the board meeting," said a diplomat in Vienna, headquarters of the IAEA. Thursday marked that two-week deadline.

The next meeting will decide whether to take the Iranian dossier to the UN Security Council for possible sanctions, something the United States has been pushing for.

Iran asserts it is only interested in generating electricity and has frequently complained of being the victim of "double standards" given that Israel -- believed to be the Middle East's sole nuclear-armed state -- is not under any international pressure.

The main sticking points are believed to be over the length and extent of any halt in enrichment activities.

Iran has reportedly already agreed to prolong a one-year-old suspension of enrichment and also suspend the making of the uranium hexafluoride gasthat is the actual feed for the enrichment process. But it appears unwilling to suspend other stages in the fuel cycle.

Earlier Thursday, top Iranian diplomat and negotiator Hossein Moussavian said "there are still internal discussions at a high level", and that "it is not yet clear" if the Iran's clerical leadership would approve or reject a deal.

And foreign ministry spokesman Hamid Reza Asefi told state television "it is imperative that our response takes into account our national interests."

Uranium conversion makes the uranium gas needed for the enrichment process which makes nuclear fuel, but which can also be the raw material for atomic bombs.

The 25-nation EU, led by Britain, France and Germany, says Iran must indefinitely and fully suspend uranium enrichment activities. Iran insists its right to enrichment -- permitted under the nuclear Non-Proliferation Treaty if for peaceful purposes -- cannot be called into question.

On Wednesday, former president and top regime cleric Akbar Hashemi Rafsanjani said Iran was at a "crucial point" in its stand-off with the UN atomic watchdog. Another official warned Iran could continue pursuing its nuclear drive "underground" and quit the NPT that empowers the IAEA if it came under too much pressure.

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