The Trump administration is also expected to 'decertify' the landmark nuclear deal next week and unveil a new strategy to isolate Iran
Iran promised on Monday to give a "crushing" response if the United States designated its elite Revolutionary Guards as a terrorist group.
The pledge came a week before President Donald Trump announces final decision on how he wants to contain Tehran. He is expected on 15 October to decertify the landmark international deal to curb Iran’s nuclear program, in a step that potentially could cause the 2015 accord to unravel.
Trump is also expected to designate Iran's most powerful security force, the Revolutionary Guards Corp (IRGC) as a terrorist organisation, as he rolls out a broader US strategy on Iran.
"We are hopeful that the United States does not make this strategic mistake," foreign ministry spokesman Bahram Qasemi was quoted as saying by the state news agency IRNA at a news conference.
"If they do, Iran's reaction would be firm, decisive and crushing and the United States should bear all its consequences," he added.
Individuals and entities associated with the IRGC are currently on the US list of foreign terrorist organisations, but the organisation as a whole is not.
IRGC commander Mohammad Ali Jafari said on Sunday "if the news is correct about the stupidity of the American government in considering the Revolutionary Guards a terrorist group, then the Revolutionary Guards will consider the American army to be like Islamic State all around the world."
Jafari also said that additional sanctions would end the chances for future dialogue with the United States and that the Americans would have to move their regional bases outside the 2,000 km (1,250 mile) range of IRGC's missiles.
'the worst deal ever'
Trump is a stern critic of the 2015 accord, which he has called "the worst deal ever", and US officials say he intends to tell US Congress next week that Tehran is not honouring its side of the bargain.
Trump is expected to announce that he is "decertifying" Iran's compliance with the agreement it signed to limit its nuclear programme in exchange for sanctions relief.
US officials insist this will not sink the deal itself but open the way for Congress to possibly develop new measures to punish other aspects of Iran's behaviour.
Resumed sanctions could derail the accord negotiated with Tehran by former president Barack Obama and other major world powers.
Congress requires the president to certify Iranian compliance with the deal every 90 days. The next date certification date is October 15.
Under the law, Congress would then have 60 days to decide whether to reimpose sanctions lifted by the deal.
'my great concern'
There are growing concerns among the international community that Trump will ditch the landmark deal.
Germany Foreign Minister Sigmar Gabriel said on Sunday that while the Germany remains committed to the agreement, which Berlin helped negotiate, "The United States is likely to quit the Iran agreement next week - that is my great concern."
Gabriel, speaking at a state election campaign event, said his question to Washington was: "What good will come of us treating Iran as though it is developing nuclear weapons after all? ... Nothing."
He accused the US administration of "replacing the rule of law with the law of the strongest".
"And that is a great danger for us because if the United States of America takes that course then the world will change," he said.
France and Britian have also rebuked the US President for his stance on the 2015 accord.