Six states including Britain are meeting in Baghdad with Iranian officials in talks aimed at pressuring Iran into curbing its ambitious nuclear programme.
The five permanent members of the UN Security Council - Britain, US, Russia, China, France and China - plus Germany are in Iraq for a second meeting since April, at Iran's suggestion. They will be led by EU foreign affairs chief Catherine Ashton.
The group, known as the P5+1 aim to persuade Iran to shut down their high-grade uranium enrichment programme, which Western powers believe would allow the country to build an atomic bomb.
The US, European Union and the United Nations have sanctions on Iran as a result of its nuclear programme, but Tehran denies claims it is aiming to develop a military grade weapon, saying it's programme is for peaceful purposes only.
It comes two days after United Nations nuclear inspectors the International Atomic Energy Agency (IAEA), met in Tehran to ask for access to examine uranium enriching facilities.
The New York Times reported on Tuesday Iran was showing signs of looking at a diplomatic solution to the international stand-off over their nuclear programme, with IAEA chief Yukia Amano saying there had been in an “important development" in giving nuclear inspectors access.
Iranian professor Mohamed Marandi, told BBC Radio 4's Today programme on Wednesday: "If we allow you to inspect some place then we must get something in return."
Ahead of the meeting, a senior Western official told Reuters the group would make "a detailed proposal that will include confidence-building measures".
Around 15,000 police and troops will protect the attendees in Iraq, according to reports.
The meeting comes as the BBC reported UK government ministers had taken legal advice on what Britain's role could be if war erupted between Israel and Iran.
Iranian leaders have said the country has a right to enrich uranium.
But the US is having to balance Iran's demand to enrich uranium with Israel's concern that they cannot be safe if Iran, whose president Mahmoud Ahmadinejad has been an outspoken critic of Israel and called Zionists "devilish", gets an atomic bomb.
A former US State Department senior adviser told Bloomberg that a deal that "would work with Iran would not satisfy Israel" and vica versa.
Israel's defence minister Ehud Barak said a "nuclear Iran is intolerable and no options should be taken off the table," AP reported.
According to Al Jazeera, Ahmadinejad is currently in China for talks about Iran's nuclear programme with his counterpart Hu Jintao.