Washington is seeking to take the Iranian issue to the United Nations Security Council, which could impose sanctions, while Britain, France and Germany want to avoid confrontation with the Islamic Republic in order to get it to cooperate with international inspectors.
The divide between the two sides is reminiscent of the transatlantic crisis before the Iraq war when France and Germany refused to follow the US hard line.
But this time Washington does not have its staunch ally Britain on its side and may not get its way when the International Atomic Energy Agency's 35-nation board of governors meets in Vienna.
"We're still involved in intense negotiations and the situation is very fluid," a Western diplomat said.
The United States charges that Iran is using what Tehran says is a peaceful nuclear program as a cover for secretly developing atomic weapons.
Washington wants Iran to be declared in non-compliance with the nuclear Non-Proliferation Treaty (NPT), particularly for secretly making small amounts of plutonium and enriched uranium, while Britain, France and Germany fear this would lead Tehran to pull out of working with the IAEA.
Tehran has warned that punishing it by taking the issue to the Security Council would set off an international crisis.
The European big three have presented their cautious approach in a draft resolution for the IAEA meeting that avoids citing Iran for non-compliance, despite a report last week by IAEA chief Mohamed ElBaradei that detailed 18 years of hidden suspicious activities by Iran.
A clear majority of the IAEA board has rallied to the European position, with support coming from Russia, non-aligned and Latin American countries, diplomats said. The non-aligneds, led by Malaysia, want the resolution to be even softer.
But in what could be a significant development, ElBaradei has told the Europeans and other delegations that "he is unhappy with the resolution as it undercuts the agency" by being weaker than his report, a diplomat said.
In his report, ElBaradei said there was so far no evidence Iran was trying to make the bomb, a conclusion Washington dismissed as "simply too impossible to believe."
But he also said that "Iran had concealed many aspects of its nuclear activities, with resultant breaches of its obligation to comply" with safeguards agreements of the NPT.
The EU-three resolution only mentions "failures to meet safeguards obligations," a formulation with no legal weight, diplomats said.
A diplomat said ElBaradei's "report is a good one and the resolution should absolutely at a minimum reflect what he had to say."
He said a weak resolution or no resolution at all "would not send the right message to Iran" about international determination to make it honor non-proliferation agreements."
The British, French and German foreign ministers won key concessions of cooperation with the IAEA on a visit to Tehran on October 21, and want to avoid moves that might scale back further cooperation.
The gap between the US and European views is so wide that "there is no certainty there will be a resolution," when the IAEA board meets, a diplomat in Vienna said.
But they said the EU was working on a revised, compromise text, possibly hardening the resolution by referring to "breaches" by Iran, after extensive lobbying from states like the Netherlands, New Zealand, Australia and Canada on behalf of the US position.