The two countries have been negotiating the deal for about a year and are likely to reach an agreement in mid-October, the conservative Sankei newspaper said, quoting defence sources familiar with North Korean affairs.
Under the plan, North Korea will export Taepodong missile components to be assembled in Iran and dispatch missile experts to pass on technical knowledge.
A North Korean arms export company known as the Changgwang Sinyong Corporation is handling the deal with Iranian military and aerospace industry officials, the Sankei said.
In July, the US government imposed sanctions on Changgwang Sinyong as well as Chinese firms for arms sales to Iran.
The North Korean firm was already punished by Washington in 2001 for Iran-related missile technology transfers and in 1996, 1998 and 2000 for violation of missile-specific export regulations, according to the State Department.
Iran and North Korea were included last year in an "axis of evil" with Iraq by US President George W. Bush and accused of aiming to spread weapons of mass destruction.
North Korea has been locked in a nuclear stand-off with the United States since October last year when Washington accused the Stalinist state of reneging on a 1994 bilateral nuclear freeze accord by running a clandestine nuclear programme based on enriched uranium.
Following the October revelations, the 1994 deal swiftly unravelled and the United States stopped fuel deliveries. North Korea then upped the stakes, kicking out UN nuclear inspectors and withdrawing from the Non-Proliferation treaty.
Last week, North Korea said it had accepted six-way talks to include North and South Korea, Russia, Japan, China and the United States to end the nuclear crisis.