"I am pleased that the Islamic Republic of Iran has indicated it will respond to the proposal of the EU3 plus 3 for a comprehensive solution to the nuclear issue on Tuesday, 22 August 2006," said Annan in a statement.

"I appeal to the Government of Iran to seize this historic opportunity. Iran's reply will, I trust, be positive and that this will be the foundation for a final, negotiated settlement," he said.

Annan said that progress on the Iranian nuclear issue was essential for regional and global stability.

"In a time of acute crisis in the Middle East, I believe that progress on the nuclear issue is essential for the stability not only of the region, but the international system itself," he said.

"It is time to take steps in the right direction. I am convinced that a way is now open for setting a milestone for international nonproliferation efforts," he said.

Iran has said it will formally respond by Tuesday to an incentive package offered by the United States, Russia, China, France, Britain and Germany to persuade Teheran to halt its nuclear fuel processing activities.

A UN Security Council resolution passed last month gives Teheran until Aug. 31 to freeze uranium enrichment or face possible sanctions.