"I believe we have the beginning of a negotiation," the official said of the talks, which opened on Wednesday and lasted late into the evening. "But still we have to come to closure...about what are the next appropriate steps."
Iran was "engaged" in the discussions, and the meeting would continue into a second day on Thursday, the official said, adding that there was "plenty to go on" for a potential further round of talks.
Earlier on Wednesday, envoys for Iran and the United States, Russia, China, France, Britain and Germany exchanged unusually detailed proposals at the talks in Baghdad in hopes of defusing a long standoff over suspicions Tehran's atomic energy programme may be a disguised quest for nuclear weapons.
Both sides have been publicly upbeat about the scope for an outline deal following a 15-month diplomatic freeze and exploratory talks in Istanbul last month.