Iranian state media say the country has successfully test-fired a newly upgraded missile system near the Strait of Hormuz, a strategic passageway in the Persian Gulf.
Iranian officials say the Iranian-made air-defense system known as Raad, or Thunder, has the capability to fire missiles with a range of 50 kilometers, hitting targets at 22,000 meters.
Admiral Amir Rastgari, a navy spokesman, said underwater and surface-to-surface rockets were also successfully tested.
The five-day drill, held annually in Iran, will end on January 2.
Iranian officials have threatened to block the Strait of Hormuz, a crucial waterway for global oil exports, in case of an attack on Iran.
Tehran has recently increased military exercises as international tensions grow over its disputed nuclear program.
Based on reporting by dpa and AP