Recep Tayyip Erdogan, Turkey's prime minister, said on Saturday that Ankara would launch a military strike against fighters from the Kurdistan Workers' Party (PKK) based in northern Iraq.
Iran has in recent weeks been echoing Turkey's frustration over the failure of the authorities in the north of Iraq to crack down on Kurdish fighters.
Another Kurdish group, Party of Free Life of Kurdistan (PJAK), affiliated with the PKK, has in recent months, been responsible for deadly attacks on security forces in northwestern Iran.
"I think it is pretty difficult to say troops shouldn't [invade] when the Turkish soldiers are being killed, and their villages attacked"
Celtic, Karlstad, Sweden
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"I think that we will be able to overcome these small grouplets," the Iranian foreign minister said.
"There are various ways of going about this. We hope our co-operation will allow us to solve this as soon as possible."
Babacan thanked Iran for its help in fighting the PKK and said both foreign ministers had discussed continuing the co-operation during their meeting.
Meanwhile Mahmoud Ahmadinejad, the Iranian president, has lashed out at "terrorists" operating in northern Iraq during talks with his Iraqi and Turkish counterparts, state media reported.
"The terrorists are harming the Iranian, Iraqi and Turkish people," Ahmadinejad was quoted as telling Jalal Talabani, the Iraqi president.
"The terrorists are the friend of no country," he told Abdullah Gul,Turkey's president, as he called for "co-ordination" with the Iraqi authorities to solve the issue".
Meanwhile, Iraqi authorities also reported that Ahmadinejad agreed with Nuri al-Maliki, the Iraqi prime minister, that the crisis can be solved peacefully.
"Both leaders agreed the activities of the PKK were damaging the interests of Iraq, Turkey and Iran but stressed that military action is not the only option to deal with it," Ahmadinejad was quoted as saying by al-Maliki's office.
"The crisis could be solved peacefully."