State television quoted Gen Ali Mehrabi, a top army commander, as saying today that the drills involve forces in central Iran.
The war games commemorate the anniversary of the liberation of Khorramshahr, a city in southwestern Iran during the country's 1980-88 war with Iraq.
Mehrabi said some of the upgraded short-range missiles to be tested include the Nazeat and the Fajr. The missiles use a combination of liquid and solid fuel.
The military manoeuvre is being held in Maranjab and Nasrabad, two desert regions north of Isfahan in central Iran Iran's army is separate from its elite Revolutionary Guard.