These steps would be cast as an "understanding" rather than an agreement requiring review by the U.S. Congress, where many oppose giving Iran benefits because of its military aid to Russia, its domestic repression and its support for proxies that have attacked U.S. interests in the region.

Having failed to revive a 2015 Iran nuclear deal, Washington hopes to restore some limits on Iran to keep it from getting a nuclear weapon that could threaten Israel and trigger a regional arms race. Tehran says it has no ambition to develop a nuclear weapon.

The 2015 deal, which then-President Donald Trump abandoned in 2018, had capped Tehran's uranium enrichment at 3.67% purity and its stockpile of this material at 202.8 kg (447 pounds) - limits Tehran has since far exceeded.

U.S. and European officials have been searching for ways to curb Tehran's nuclear efforts since the breakdown of indirect U.S.-Iranian talks. The willingness to restart discussions illustrates the rising sense of urgency in Western capitals about Iran's programme.

The U.S. government has dismissed reports it is seeking an interim deal, using carefully constructed denials that leave open the possibility of a less formal "understanding" that could avoid congressional review.

State Department spokesman Matt Miller denied there was any deal with Iran.

However, he said Washington wanted Tehran to de-escalate tensions and curb its nuclear programme, cease support for regional proxy groups that carry out attacks, halt support for Russia's war on Ukraine and release detained U.S. citizens.

"We continue to use diplomatic engagements to pursue all of these goals," he added, without giving details.

An Iranian official said: "Call it whatever you want, whether a temporary deal, an interim deal, or a mutual understanding - both sides want to prevent further escalation."

In the first instance, "that will involve prisoner exchange and unblocking part of Iran's frozen assets", he said.

Further steps might include U.S. sanctions waivers for Iran to export oil in return for ceasing 60% uranium enrichment and greater Iranian cooperation with the U.N. nuclear watchdog, he said.

COOLING DOWN

"I'd call it a cooling-down understanding," said a Western official on condition of anonymity, saying there had been more than one round of indirect talks in Oman between U.S. National Security Council official Brett McGurk and Iran's chief nuclear negotiator, Ali Bagheri Kani.

U.S. Special Envoy for Iran Rob Malley has also met Iran's ambassador to the U.N. after months of Iran refusing direct contact.

The Western official said the idea was to create a status quo acceptable for all, getting Iran to avoid the Western redline of enriching to 90% purity, commonly viewed as weapons grade, and possibly even to "pause" its enrichment at 60%.

In addition to the 60% pause, both sides are discussing more Iranian cooperation with the International Atomic Energy Agency and not installing more advanced centrifuges in return for the "substantial transfer" of Iranian funds held abroad, the official said.

The official did not specify whether the pause meant Iran would commit not to enrich above 60% or whether it would stop enriching to 60% itself.

AVOIDING AN IRAN-ISRAEL CLASH

The order of the steps and how they might relate to a release of three detained U.S. citizens held by Iran was also unclear. Officials have previously said freeing them might be connected to the release of frozen funds.

Iran's foreign ministry spokesperson said on Monday the two nations could exchange prisoners soon if Washington showed goodwill, saying there were talks through intermediaries, without giving details. Iran's mission to the U.N. did not immediately respond to a detailed request for comment.

The Western official said the key U.S. objective was to keep the nuclear situation from worsening and to avoid a potential clash between Israel and Iran.

"If (the) Iranians miscalculate, the potential for a strong Israeli response is something that we want to avoid," he said.

U.S. officials appear to avoid saying they are seeking an "agreement" because of a 2015 law under which Congress must get the text of any accord about Iran's nuclear programme, opening a window for legislators to review and potentially vote on it.

U.S. House Foreign Affairs Committee Chairman Michael McCaul, a Republican, wrote to President Joe Biden on Thursday saying "any arrangement or understanding with Iran, even informal, requires submission to Congress".

(This story has been refiled to correct the dateline to June 16)