EU foreign ministers said a lucrative trade accord could be in danger if Iran fails to meet international concerns over nuclear non-proliferation, fighting terrorism, human rights and the Middle East peace process.
"More intense economic relations can be achieved only if progress is reached in the four areas of concern," the EU ministers said in a statement issued at talks here.
Iran is under pressure from the world community and the UN's International Atomic Energy Agency (IAEA) to open up its nuclear programme to snap inspections.
The IAEA has given Iran until October 31 to answer questions concerning allegations that it is seeking to develop atomic weapons.
The EU foreign ministers, restating demands they made in July, called on Tehran to sign an additional protocol to the nuclear Non-Proliferation Treaty (NPT) that would allow IAEA inspectors to descend on its nuclear sites without warning.
The EU hopes "Iran will sign and implement the additional protocol without delay as a first and essential step to restore international trust in the peaceful nature of its nuclear program," said the ministerial statement.
The United States alleges the Iranians have used a nuclear plant near Tehran to test centrifuges used to make highly enriched uranium, which can be used to make atomic bombs.
The EU, which unlike the United States advocates a policy of constructive engagement with Iran, has been conducting talks on a trade accord with the Islamic republic over the past year.
But according to the Iranian foreign ministry, the 15-nation bloc's Italian presidency has warned that the trade talks will effectively stop without a resolution to the nuclear crisis.
The reported threat sparked an angry reaction from the Iranian government on September 18.
"Iran and the European Union began their political and commercial negotiations based on mutual respect, and just as Iran did not accept preconditions to start the talks, it will very certainly not accept preconditions to continue them," foreign ministry spokesman Hamid Reza Asefi said.
The EU statement said the bloc would review the situation after the IAEA reports back on whether or not Iran is complying with its demands.