President Hassan Rouhani called for "fair and constructive" nuclear talks Tuesday as Iranians marked the 35th anniversary of the Islamic revolution amid recent progress in negotiations with world powers.

Rouhani, a moderate elected last year on vows to pursue a diplomatic solution to the decade-long impasse over Iran's nuclear programme, also warned that Western nations should not have "delusions" about having a military option.

He spoke as hundreds of thousands of people took to the streets to mark the anniversary of the revolution that ousted the US-backed shah, with many railing against the United States, still commonly referred to as the "Great Satan."

Iran is set to resume talks in Vienna next week with the P5+1 group of world powers on a comprehensive nuclear accord following a landmark interim agreement reached in November in which it agreed to curb some nuclear activities for sanctions relief.

But Tehran has laid out a series of "red lines" regarding the talks, and in a show of defiance on the eve of the anniversary announced it had successfully tested a long-range missile and a laser-guided projectile.

"Iran is committed to fair and constructive negotiations within the framework of international regulations; we hope to witness such a willingness in the other party in the upcoming talks," Rouhani said in a speech broadcast live on state television.

"I say explicitly, if some have delusions of having any threats against Iran on their tables, they need to wear new glasses. There is no military option against Iran on any table in the world," he added.

Western nations have long suspected Iran of covertly pursuing nuclear weapons alongside its civilian programme, allegations denied by Tehran, which insists its nuclear activities are entirely peaceful.

Neither the United States nor Israel has ruled out military action to prevent Iran from developing a nuclear weapon, if diplomacy fails.

Rouhani delivered the speech in honour of the anniversary at central Tehran's Azadi Square, where huge crowds had gathered, many of them chanting against the United States.

"We don't trust America. All they want is to plunder our wealth", a 20-year-old Bassij Islamic militia member told AFP.

"We are fine with enduring the hardships (of international sanctions) because it will lead to the preservation of our rights."

'Red lines' in next week's talks

Iran made progress over the weekend with the UN nuclear watchdog by agreeing to divulge information that could shed light on allegations of possible past weapons research.

But officials also insisted on "red lines" in next week's talks with the P5+1 -- Britain, France, the United States, Russia and China plus Germany.

Negotiators said they would neither discuss Iran's ballistic missile programme nor agree to the closure any nuclear sites or abandoning the "right" to enrich uranium to 20 percent, a few technical steps away from weapons-grade material.

The missile programme -- targeted by UN Security Council sanctions -- worries Western powers, as Iran boasts long-range missiles with a maximum range of 2,000 kilometres (1,200 miles), enough to reach Israel.

The November deal is seen as a victory for Rouhani's foreign policy, after eight years of stalled talks and escalating sanctions under his hardline predecessor Mahmoud Ahmadinejad.

Rouhani has the support of supreme leader Ayatollah Ali Khamenei, but hardliners argue that Iran gave up too much in the November deal and have been critical of his diplomatic overtures, particularly towards the United States.

US and Iranian officials have held several face-to-face talks in recent months, but the resumption of diplomatic relations with Washington, which severed ties with Iran after the seizure of its embassy in the aftermath of the revolution, is still a taboo for many Iranians.

Tehran on Monday summoned the Swiss ambassador to Iran, whose country represents American interests, to protest US measures imposed on companies and individuals for violating sanctions against Iran.

Iranian Foreign Minister Mohammad Javad Zarif meanwhile warned that the talks in Vienna would be "difficult," while anticipating that a framework for future negotiations would be discussed.

"The biggest challenge is the lack of trust," he said.