Diplomats from six world powers have offered Iran new proposals to ease international concerns about its nuclear programme, but appeared to reject Tehran's appeals to ease economic sanctions.
The proposal by the US and its negotiation partners - the UK, China, Russia, France and Germany - focused on Iran's highest-level uranium enrichment.
Many world leaders fear the 20% enrichment could be quickly turned into warhead-grade material.
The proposal could meet a swift refusal from Iran. Its envoys want agreements to lessen, or at least delay, sanctions that have targeted critical oil exports and cut off the country from lucrative European markets.
Mike Mann, spokesman for the head of the European Union delegation that is leading the talks in Baghdad, told reporters: "We hope the package that we put on the table is attractive to them so they will react positively. It's up to them to react."
Mr Mann would not discuss whether the 20% enrichment represented a red line that could again scuttle the negotiations, which only restarted last month after collapsing early last year.
The high-enriched uranium is far above the level needed for energy-producing reactors, but is used in medical research. Iran claims its nuclear programme is only for electricity and medical applications.
Tehran has tentatively agreed to allow UN inspectors to restart investigations into a military base with suspected links to nuclear arms-related tests. Mr Mann expressed cautious optimism about the still-unsigned deal with the International Atomic Energy Agency, but said it would have little bearing on the latest talks.
Despite the new proposals, no breakthrough accords are expected in the talks in Iraq's capital, suggesting that all sides are still shaping their strategies and the negotiation process is likely to be long.
That could allow US and European allies to significantly tone down threats of military action, but it would be likely to bring objections from Israel, which claims Iran is trying to buy time to keep its nuclear fuel labs in full operation.