The UK, France and Germany are to retain sanctions on Iran in an attempt to deter Tehran from selling drones and missiles to Russia.
In 2015 Iran agreed to a nuclear deal and, under the terms, some sanctions were due be lifted next month.
However, the European nations believe Iran breached the deal by enriching and storing uranium.
Iran says their move is "illegal and provocative" and "clearly violated" the terms of the nuclear deal.
European diplomatic sources said the decision was driven not just by a desire to prevent Iran gaining economically, but also to try to reduce the possibility of Tehran transferring ballistic missiles to Russia.
Tehran has already sold many drones to Moscow which have been used against Ukraine.
The UK, France and Germany said the sanctions were designed "to maintain nuclear proliferation-related measures on Iran, as well as arms and missile embargoes".
The European powers - known collectively as E3 - announced that they would incorporate expiring UN sanctions into their own laws.