Iran is also known to be combating Kurdish groups inside its own territory.
The Turkish army mobilised 8,000 troops, backed by air support, in Sunday's attack in the central-eastern province of Tunceli, the military said, but gave no word on any army casualties.
"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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Despite the disapproval from Washington and Baghdad, Turkey has threatened a cross border incursion into Iraq to deal with the PKK fighters there.
In Iran, Babacan reiterated that threat, after his meeting with Manouchehr Mottaki, the Iranian foreign minister, but said it was one of many options.
"We have different instruments. We can use diplomacy or we can resort to military means," he said following talks with Mottaki. "All of these are on the table."
"The Turkish people have lost their patience... We are asking all our friends to support us in this endeavour, our fight against terror."
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 the PKK, though it has drawn short of backing an incursion.
Another Kurdish group, Party of Free Life of Kurdistan (PJAK), which is affiliated with the PKK, has been responsible for deadly attacks on security forces in northwestern Iran in recent months.
"I think that we will be able to overcome these small grouplets," Mottaki 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.
'Solving the issue'
Mahmoud Ahmadinejad, the Iranian president, has also lashed out at "terrorists" operating in northern Iraq during talks with his Iraqi and Turkish counterparts, according to Iranian state media.
"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, the 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.