British Prime Minister Gordon Brown was quoted by AFP as saying that Teheran's missile test announcement was a matter of "serious concern to the international community and it does make the case for moving further on sanctions."

"We will treat this with the seriousness it deserves." said Brown.

Iran successfully test-fired an improved version of its Sajjil-2 medium-range missile which it says can reach targets inside Israel, state television announced.

The Sajjil is a solid fuel, high-speed missile with a range of about 1,930 kilometers, placing Israel well within range and reaching as far away as southeastern Europe with greater precision than earlier models.

Iran has intensified its missile development program in recent years, causing concern in the United States and its allies at a time when they accuse Teheran of seeking to build a nuclear weapon. Iran denies the charge and says its nuclear program is aimed at generating electricity.

The Iranian announcement comes on the heels of the Pentagon's statement from Monday that a US missile defense drill would simulate an Iranian attack - a departure from the usual scenario of a North Korean attack.

On Sunday, Britain's The Times claimed it had obtained confidential intelligence documents from "foreign intelligence agencies" and quoted a source at an "Asian intelligence agency" as confirming that Iran had been working on the device "as recently as 2007."