The United States said it would not grant a visa to Iran's proposed UN ambassador, citing the envoy's links to the 1979-1981 hostage crisis, in a rare step that raises questions about how much influence the White House can wield over the world body.
President Barack Obama had come under strong pressure not to allow Hamid Abutalebi into the country to take up his position in New York.
The move has raised concerns that the dispute would disrupt delicate negotiations between Tehran, Washington and other world powers over Iran's nuclear programme.
If the US starts to pick and choose who can represent other countries at the UN, other countries are likely to react angrily. How would Washington feel if Switzerland vetoed its choice for American ambassador to the Human Rights Council in Geneva?
White House spokesman Jay Carney said the UN and Iran had been told "that we will not issue a visa to Mr Abutalebi".
Neither the White House nor the US State Department provided further explanation.
US law allows the government to bar UN diplomats who are considered national security threats. Obama's potentially precedent-setting step could open the US to criticism that it is using its position as host nation to improperly exert political influence.
The US government objects to Abutalebi because of his suspected participation in a Muslim student group that seized the embassy in November 1979 and held 52 Americans hostage for 444 days.
The veteran diplomat has acknowledged that he acted as an interpreter for the group which held the hostages.
Iran on Saturday dismissed the decision to deny Abutalebi a visa, saying it would take up the case directly with the UN.
"We do not have a replacement for Mr Abutalebi and we will pursue the matter via legal mechanisms anticipated in the United Nations," Abbas Araghchi, a senior Foreign Ministry official and top nuclear negotiator, was quoted by Iran's official IRNA news agency as saying.
Obama's decision came days after negotiators from Iran, the US and five other world powers met in Vienna for another round of nuclear talks.
An Iranian official told Reuters news agency he did not expect the dispute to affect the nuclear negotiations.
US officials also said they did not expect any impact. The UN said it had no comment at this time on the US decision.
Obama's decision raised concerns about possible precedents, such as calls from US interest groups for future visas to be denied for political reasons, or retaliation abroad.
"If the US starts to pick and choose who can represent other countries at the UN, other countries are likely to react angrily. How would Washington feel if Switzerland vetoed its choice for American ambassador to the Human Rights Council in Geneva?" said Richard Gowan, an international relations expert at New York University.