Marathon talks between Iran and world powers in Vienna ended Saturday after negotiators gave themselves four more months to try and bridge major gaps and strike a historic nuclear deal.
New rounds of talks were expected in the coming weeks, with the date and place yet to be decided, diplomats said.
"While we have made tangible progress on some of the issues and have worked together on a text (for a deal)... there are still significant gaps on some core issues," lead negotiator and EU foreign policy chief Catherine Ashton told journalists in the early hours of Saturday.
The talks will now continue until November 24, she added.
Under the terms of the extension, the United States said it would unblock some $2.8 billion (2.1 billion euros) in frozen funds, in return for Iran converting a quarter of its 20-percent enriched uranium stocks -- which can be used to make a bomb -- into fuel.
American officials spoke of resuming talks, perhaps at expert level, in August, with the UN general assembly in September also expected to provide a stage for the next phase of negotiations.
In a statement repeated in Farsi by Iranian Foreign Minister Mohammad Javad Zarif, Ashton said the parties would "reconvene in the coming weeks... with the clear determination to reach agreement... at the earliest possible moment".
Last November, Iran and the five permanent members of the UN Security Council plus Germany agreed an interim deal under which the Islamic republic froze certain nuclear activities for six months in return for some sanctions relief.
The deadline for a lasting deal was July 20, with the sides having the option of extending.
US Secretary of State John Kerry, who also tried to broker a breakthrough in Vienna earlier this week, said Friday that the extension was "warranted by the progress we've made."
"To turn our back prematurely on diplomatic efforts when significant progress has been made would deny ourselves the ability to achieve our objectives peacefully," Kerry said.
"A lot of work has been done and we've agreed... that we would like to try and complete this process and to take this extra time in order to do that," Ashton also said in a statement Saturday.
"We are determined to make sure that the agreement is a very good one."
- Extending breakout -
The final deal would ease fears that despite its denials Iran is seeking to develop nuclear weapons after a decade of atomic expansion.
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But it is highly ambitious and fiendishly complex.
The six powers want Iran to dramatically reduce its nuclear programme for a lengthy period of time and agree to more intrusive UN inspections.
This would expand the time needed for Tehran to develop a nuclear weapon, while giving the world ample warning of any such "breakout" push.
The two sides are believed to have narrowed their positions in recent weeks on a few issues such as the Arak reactor, which could give Iran weapons-grade plutonium, and enhanced inspections.
But they remain far apart on the key issue of Iran's capacities to enrich uranium, a process which can produce fuel for reactors but also the core of a nuclear bomb.
- Unlocking of funds -
The terms of the extension call for Iran to turn medium-enriched uranium into reactor fuel, which will make it "very difficult for Iran to use this material for a weapon in a breakout scenario," Kerry said.
Although Washington will unblock some of Iran's funds, "the vast majority of its frozen oil revenues will remain inaccessible," he added.
Over the past six months, Iranian oil sales have brought in a further $25 billion, on top of the about $100 billion already frozen in accounts around the world, according to US officials.
But both the US and Iran face tough domestic pressure.
US lawmakers, widely supportive of Iran's arch enemy Israel, have threatened to ramp up sanctions without a sufficiently rigorous agreement.
Iran's negotiators in turn face pressure from hardliners, who view the United States as the ultimate enemy and oppose any agreement seen as a concession.
French Foreign Minister Laurent Fabius, on a visit to Cairo, said Saturday he hoped that with the new deadline, Iran will "at last make the necessary choices that we expect to reach a complete, credible and lasting agreement."
His German counterpart Frank-Walter Steinmeier called for Iran to "show it is ready to dispel all doubts" about its nuclear intentions.
The next few months "could be the last and best chance for a long time to end this nuclear argument peacefully," he warned.
The Iranian exiled opposition in Paris meanwhile slammed the extension as "providing time to the mullahs for further deception."