Iran promised on Monday to give a "crushing" response if the United States designated its elite Revolutionary Guards as a terrorist group.
The pledge came a week before President Donald Trump announces a final decision on how he wants to contain Tehran. He is expected on Oct 15 to decertify a landmark 2015 international deal to curb Iran's nuclear program, in a step that potentially could cause the accord to unravel.
Trump is also expected to designate Iran's most powerful security force, the Revolutionary Guards Corp (IRGC) as a terrorist organization, as he rolls out a broader U.S. strategy on Iran.
"We are hopeful that the United States does not make this strategic mistake," foreign ministry spokesman Bahram Qasemi was quoted as saying by the state news agency IRNA at a news conference.
"If they do, Iran's reaction would be firm, decisive and crushing and the United States should bear all its consequences," he added.
Individuals and entities associated with the IRGC are already on the U.S. list of foreign terrorist organizations, but the organization as a whole is not.
IRGC commander Mohammad Ali Jafari said on Sunday "if the news is correct about the stupidity of the American government in considering the Revolutionary Guards a terrorist group, then the Revolutionary Guards will consider the American army to be like Islamic State all around the world."
Jafari also said that additional sanctions would end the chances for future dialogue with the United States and that the Americans would have to move their regional bases outside the 2,000 km (1,250 mile) range of IRGC's missiles.
The foreign ministry spokesman Qasemi also denied U.S. accusations that Iran had cooperated with North Korea.
In an interview that was aired on Saturday night, Trump accused Iran of "funding North Korea" and "doing things with North Korea that are totally inappropriate."
Qasemi called the accusations "baseless."
"Israel and some specific countries are raising these accusations to create Iranophobia."
In his first speech to the U.N. General Assembly in September Trump called Iran "a corrupt dictatorship", and the nuclear deal negotiated by his predecessor Barack Obama "an embarrassment".
The deal, which was also supported by Britain, France, Germany, Russia, and China, saw Iran agree to curbs on its nuclear program in return for the lifting of international sanctions that had damaged its economy.
Washington still maintains its own more limited sanctions on Iran over its missile program and over accusations it supports terrorism.
The Trump administration is seeking to put more pressure on the IRGC, especially over recent ballistic missile tests and what Washington has called its "malign activities" across the Middle East.
U.S. sanctions on the IRGC could affect conflicts in Iraq and Syria, where Tehran and Washington both support warring parties that oppose the Islamic State militant group.
The U.S. government imposed sanctions in July on 18 entities and people for supporting the IRGC in developing drones and military equipment.
In August, the U.S. Congress overwhelmingly approved the "Countering America's Adversaries Through Sanctions Act" which imposed new sanctions on Iran for its ballistic missiles program.
The act, signed by Trump, also imposed sanctions on North Korea for its nuclear weapons development and on Russia for its alleged efforts to interfere in the 2016 U.S. election.