Gen. David Petraeus has accused Iran of still backing Shiite militants in Iraq and giving a "modest level" support -- including explosives -- to the Taliban in Afghanistan.
"Iran continues to fund, train, equip, and give some direction to the residual Shiite militias and extremists elements in Iraq," he told ABC News.
"There are daily attacks with the so-called signature weapons only made by Iran – the explosively formed projectile, forms of improvised explosive devices, etc.," he said. The general said that while overall attacks are down 90 percent in Iraq, militants are aiming for periodic high profile attacks that attract media attention.
Iraq has been rocked in recent days by a series of deadly car bombings in the heart of Baghdad.
Petraeus, head of the U.S. Central Command, said Iran was also aiding Taliban elements in Afghanistan, despite long-standing animosity between the Iranian Shiites and the extremist Sunnis in Afghanistan.
"In Afghanistan Iran provides a modest level of equipment, explosives and perhaps some funding to the Taliban in western Afghanistan," Petreaus told ABC News.
"Our sense is, frankly, that they don't want the Taliban to succeed. They don't want an extremist Sunni regime running their eastern neighbor. But they don't want us to succeed too easily either," the general said.
"It is conceivable they would want the same outcome as we would, an Afghanistan that remains whole, that is not run by the Taliban, and does not give sanctuary again to Al Qaeda."
In the early days of the Afghan invasion Iran and the U.S. cooperated in replacing the Taliban government with what was seen as a shared interest in stabilizing Iran's eastern neighbor.
Petraeus says such cooperation today is "conceivable," but that Iran "has a hard time getting past the fact that we're part of the effort."
Iranian officials have repeatedly blasted the U.S. military presence in its region. On Saturday Foreign Minister Manouchehr Mottaki said America's fight in Afghanistan was "without logic," saying the country's drug trade, human trafficking, and overall security was worse since the U.S. invasion.
Even as the rhetoric ratchets up, and the U.S. and Iran remain at loggerheads over the nuclear issue and its recent spate of missile tests, Petraeus downplayed the value of a military strike on the Islamic Republic.
"The consequences of a possible strike on Iran in some respects are incalculable. No one really knows what the outcome would be, no one knows how much damage could be done to Iran, how much that could set back the nuclear program," he said.
Petraeus Fears Yemen Could Be Next Militant Hotbed
"We don't think that Iran wants to get into a fight with the United States. They know that their conventional capability is far lower than ours. What they tend to do is carry out indirect forms of activity, to use proxy elements...a capability that they have developed over the years."
America's Gulf Arab allies say Iran is now fighting a new proxy war in Yemen, supporting Shiite Houthi rebels who have long challenged the central government and who recently engaged in cross-border fights with the Saudi military. Analysts anxiously describe the situation as the development of another Hezbollah, one at Saudi Arabia's doorstep.
Iran has denied supporting the rebels, though it has defended them in public statements, accusing the Saudis of "fratricide" for fighting and killing Houthi rebels. The U.S. has said it has no independent evidence proving an Iranian link to the Houthis, but has supported Yemeni authorities against what it described as an armed insurgency.
Petraeus says he does worry about Yemen as the next potential hotbed of militancy. One of the poorest states in the region, Yemen is home to the headquarters of Al Qaeda in the Arabian Peninsula and run by a weak central government.
"There's tribal elements, discontent in some areas, a lack of basic services, and a very rugged terrain that Al Qaeda has found conducive to its operations in the border areas of Pakistan," Petraeus told ABC News.
His overall message on the Iraq war was that violence is down, and that the withdrawal of U.S. troops remains on track. The postponed Iraqi elections, he said, would only speed up the drawdown. He described how the strategy credited with calming the violence in Iraq, one which involved working with local tribes to foster more capable self-defense at the local level, would be replicated in Afghanistan.
"Is there potential for this? We think so. We have launched initiatives to test that proposition," he said. Part of the approach involves a margin of forgiveness and reconciliation, allowing low- and mid-level Taliban fighters to put down their arms and re-enter society under the current government.
"There have actually been in the past few months several reasonably significant cases of Taliban elements literally coming in with their hands up," he said, adding that the "true irreconcilables have to be killed or captured."