US President Donald Trump has condemned Iran as a "fanatical regime" and refused to continue certifying an international nuclear deal.
International observers say Iran has been in full compliance with the 2015 deal freezing its nuclear programme.
Iranian President Hassan Rouhani said the US was "more than ever isolated" and could not change the nuclear deal.
Mr Trump said the deal was too lenient, and Iran had "committed multiple violations of the agreement".
It was "not living up to spirit of the deal", he said, but was receiving the benefit of sanctions relief regardless.
He said that the US reserved the right to leave the deal at any time, and in later remarks he said he would quit the deal unless "satisfactory" changes were made.
Mr Trump had been under pressure at home and abroad not to scrap the deal between Iran and the US, UK, France, China and Russia plus Germany.
Yukiya Amano, head of the International Atomic Energy Agency (IAEA), said Iran was implementing the deal and was subject to "the world's most robust nuclear verification regime".
Within minutes of his address, EU's foreign policy chief Federica Mogherini insisted the deal was "robust" and that there had been "no violations of any of the commitments in the agreement".
She said it was not in the power of "any president in the world" to terminate the agreement, which had been established by a UN Security Council resolution.
In a joint statement, the UK, Germany and France said they were "concerned" by Mr Trump's move but remained committed to the deal. But they added they also "shared concerns about Iran's ballistic missile programme and regional activities".
Russia also remained committed to the deal and was opposed to the use of "aggressive and threatening rhetoric in international relations".
Israeli Prime Minister Benjamin Netanyahu congratulated Mr Trump, who he said had "boldly confronted Iran's terrorist regime".
President Trump has recast the list of global threats, with Iran replacing Islamic State as Enemy Number One.
That world view is shared by his strongest supporters in the region, including Israel and Gulf Arab leaders who have long seen Iran as their primary threat, and a rival with vast sway across the Middle East.
They resented Washington's focus on the Iran deal during President's Obama administration. Like President Trump, they want to undo his legacy. The new approach imposes new sanctions but stops short of designating the Revolutionary Guards as a terrorist group - a step Iran says would be tantamount to a declaration of war.
The urgent question now is whether the new strategy will embolden Iran's hardliners including the Revolutionary Guards. Like US forces, they're involved in battles to defeat IS in Iraq and Syria, and may also see a new enemy.
On two occasions, he said, they had exceeded the limit of 130 tonnes of heavy water (a source of plutonium suitable for a nuclear bomb) .
Until recently, he said, the regime had failed to meet expectations in its operation of advanced centrifuges.
He claimed it had also "intimidated international inspectors into not using the full inspection authorities that the agreement calls for".
Among the changes it is seeking is the end to the "sunset" clauses in the deal, one of which sees restrictions on Iran's nuclear enrichment programme lifted after 2025, greater access to nuclear sites and the inclusion of Iran's ballistic missile programme.
Mr Trump focused on the activities of the Revolutionary Guards, which he called the "corrupt personal terror force of Iran's leader", and Iran's missile programme, which he said threatened "global trade and freedom of navigation".
A key criticism of the Iran deal by Mr Trump has been that it fails to cover Iran's ballistic missile programme. Last month, Iran successfully tested a new medium-range missile with a 2,000km (1,200-mile) range.
Mr Trump said he would impose sanctions outside the Iran deal targeting both.
Under the Iran Nuclear Agreement Review Act (Ingra), Congress requires the US president to certify every 90 days that Iran is upholding its part of the nuclear agreement.
Mr Trump had already recertified it twice and had a deadline of Sunday to make his latest report back.
But his refusal to recertify gives Congress 60 days to decide whether to pull out of the nuclear deal by re-imposing sanctions.
Donald Trump, trying to reconcile a bluntly delivered campaign promise with the tricky realities of governing, is taking a half-step - and handing the mess to Congress.
Legislators do not make for great caretakers, however, and without firm White House guidance Iran may prove a daunting challenge. The president has decertified Iran's compliance, but Congress will have to decide how to fix the deal to his liking.
The administration recommends establishing "triggers" that would automatically impose penalties on the Iran. That will take a lot of legislative manoeuvring, not Washington's strong suit lately.
There are signs of progress in Congress, but with tax reform and budget negotiations continuing, the schedule is packed. At some point Mr Trump could again be on the spot. He says if there's no further action, he'll officially nix the deal.
The original Iran deal legislation was a way to allow congressional Republicans to object to the agreement without killing it. Now, it seems, Mr Trump wants new provisions that will allow him to kill it - or keep it - without getting his hands dirty.
A strategy paper released by the White House highlights calls for neutralising Iran's "destabilising influence and constraining its aggression, particularly its support for terrorism and militants".
The US, it says, will work to revitalise traditional alliances and regional partnerships as "bulwarks against Iranian subversion".
Efforts will be made to deny funding for the Iranian government and the Revolutionary Guards' "malign activities" and counter threats from ballistic missiles "and other asymmetric weapons".
Formally known as the Joint Comprehensive Plan of Action, it is designed to prevent Iran developing a nuclear weapon.
It lifted some sanctions that stopped Iran from trading on international markets and selling oil.
The lifting of sanctions is dependent on Iran restricting its nuclear programme. It must curb its uranium stockpile, build no more heavy-water reactors for 15 years and allow inspectors into the country.