General Hossein Salami, the head of the air force arm of the Iranian revolutionary guards, on Friday confirmed the launch by saying: "Today, a remarkable goal of the Islamic Republic of Iran's defence forces was realised with the successful test-firing of a new missile with greater technical and tactical capabilities than those previously produced."
The Iranian-made missile, reported on television as being called the Fajr-3, was test-fired on the first day of week-long military exercises in the Gulf and can "hide from radars and evade anti-missile missiles", according to Salami.
He did not disclose the range of the Fajr, which means victory in Farsi, but said it depended on the weight of the warhead.
Iran already has medium-range Shahab-3 missiles with a range of 2,000 km which puts Israel and US bases in the Middle East within reach.
The Shahab-3 is also capable of carrying a nuclear warhead.
Thousands of Iranian troops are beginning wargames in the Gulf to prepare the country's armed forces for warding off "threats" amid increasing tensions with the West over Tehran's nuclear programme.
The exercises will involve 17,000 members of the Revolutionary Guards as well as boats, fighter jets and helicopter gunships.
Iran launched a weapons development programme during the 1980-88 war with Iraq to overcome a US weapons embargo.
Since 1992, Iran has produced its own tanks, armoured personnel carriers, missiles and a fighter plane.