Iran successfully test-launched its Shihab-3 ballistic missile on 15 July, and the weapon achieved its maximum range of 1,300km (800 miles).
Israeli intelligence sources say that unlike the first test in 1998, the latest firing was successful and brings the weapon system to within three years of an operational capability.
The sources say Iran is developing other ballistic missiles with ranges of 2,000-5,000km.
The Shihab-3 is capable of carrying a 1,000kg (2,200lb) warhead. It has been developed from the North Korean No Dong missile, itself a development of the Soviet SS-1c Scud, with an improved guidance system. The Iranians have had help from North Korea and Russia.
Iran has begun to form units to operate the ballistic missile and has built five launch pads for it. Dr Ephraim Sne, Israel's deputy defence minister, says the country should deal with the ballistic missiles threat with a "multi-dimensional defence system".
Source: Flight International