"A successful missile launch was carried out within the framework of examining rocket propulsion," the Israeli defence ministry said in a statement on Thursday.
Israel is thought to be developing the Jericho-3 ground-to-ground missile that could have a range of up to 4,500km.
Israel, Washington's staunchest ally in the Middle East, says Iran could have a nuclear bomb by 2010 and that an Iranian nuclear weapon would threaten the Jewish state's existence.
But Israel is widely considered to be the Middle East's sole nuclear power with an estimated but undeclared arsenal of 200 warheads.
"We expect the world will not allow the appearance of a nuclear Iran"
Tvipi Livni,
Israeli foreign minister |
The missile test came shortly after George Bush, the US president, visited Israel on a Middle East tour that was largely devoted to bolstering his campaign to isolate Iran, which he has branded a "threat to world peace".
Tehran insists that its nuclear programme is for entirely civilian purposes.
'Iron Dome'
Israel has been developing a multi-layered defence system, dubbed the "Iron Dome", aimed at intercepting rockets and missiles, but a defence ministry official told the AFP news agency that Thursday's test firing was not linked to the system.
The price of oil briefly rose by almost $1 to more than $92 a barrel on news of the test.
Tzipi Livni, Israel's foreign minister, said on a visit to Moscow on Thursday that Russia's first shipment of nuclear fuel to Iran's first power plant in Bushehr "may serve military goals".
In a speech at the Russian Diplomatic Academy, she said that UN sanctions had put "certain pressure" on Tehran, but their effect "has not been critical".
"Those taking decisions on Iran are being watched by everyone in our region, including Israel and moderate Arab regimes," Livni said. "We expect the world will not allow the appearance of a nuclear Iran."