Six world powers began fresh talks with Iran on Friday in a bid to resolve tensions over its controversial nuclear drive, but the United States warned against building up hopes of a breakthrough.

EU foreign policy chief Catherine Ashton and Iran's top nuclear negotiator, Saeed Jalili, led the delegations which convened for the two-day meeting at a seafront Ottoman palace in Istanbul, a Turkish diplomat said.

Ashton represented the so-called P5+1 group of Britain, China, France, Russia, the United States and Germany.

The United States, which suspects Iran's nuclear programme masks efforts to develop an atomic bomb, tamped down expectations for the talks but stressed the need for Iran to engage in a "credible" process to dispel the suspicions.

"We're not expecting any big breakthroughs," Mark Toner, a state department spokesman, said in Washington ahead of the meeting.

"But we want to see a constructive process emerge that. Leads to Iran engaging with the international community in a credible process and engaging and addressing the international community's concerns about its nuclear program," he said.

The Istanbul meeting was the second round after negotiations between the P5+1 group and Iran resumed last month in Geneva after a 14-month hiatus.

Bruno Tertrais, a French analyst specialising on Iran, described the meeting as "not negotiations but an attempt to find a way to resume the negotiations."

"The Iranians are playing for time — that is their main strategy. The P5+1 has no illusion," he said.

In the eve of the talks, Russia — which for the past decade has been building Iran's sole nuclear power plant — called for discussions on lifting UN sanctions on Tehran, after US Secretary of State Hillary Clinton suggested Washington might consider fresh unilateral sanctions.

"The nuclear programme must be at the heart of the discussions. But there's not only one topic for this meeting, the lifting of sanctions on Iran must also be on the agenda," Russian foreign minister Sergei Lavrov said.

Russia and China, one of Iran's big trading partners, had backed all four sets of UN sanctions against Tehran.

The talks are aimed at ascertaining whether Iran is seeking nuclear weapons or is indeed looking only to meet the energy needs of its growing population, as it insists.

Iran is under four sets of UN sanctions over its refusal to suspend uranium enrichment, the sensitive process which can be used to make nuclear fuel or, in highly extended form, the fissile core of an atom bomb.

The US and the EU have imposed a series of their own unulateral sanctions on Tehran.

Iranian President Mahmoud Ahmadinejad has called for the lifting of the sanctions if the West wanted to see progress in the talks.

He raised the bar on Wednesday, telling a cheering crowd at home that Tehran would not back down from its nuclear programme.

"They say: 'We want negotiation'. You are free to choose the path (of either cooperation or confrontation), but bear in mind that by adopting the old path (of confrontation), you will face a more scandalous defeat," he said.

"You could not stop us from being nuclear . The Iranian nation will not retreat an inch. The nuclear issue is over from the Iranian point of view."

Iran's atomic chief Ali Akbar Salehi has gone further, insisting Tehran will not even discuss its "nuclear dossier" at the Istanbul meeting, a tactic that Tehran has employed ahead of earlier talks with the powers.