The United States has granted South Korea a sanctions exemption, allowing the country to pay millions of dollars of overdue compensation to an Iranian investor over a 2010 dispute.
Seoul's foreign ministry said it had received a "specific license" from the US Treasury Department allowing the South Korean government to pay compensation to Iran's Dayyani Group.
"The license allows using the US financial system to pay compensation to the Iranian private investor," AFP quoted the ministry as saying in a statement.
In 2018, the International Center for Settlement of Investment Disputes ordered Seoul to pay 73 billion won ($61 million) to the Dayyani Group over a failed takeover of Daewoo Electronics in 2010.
The license will serve as an "important foundation" for settling the dispute with the Iranian investor, the ministry added, expressing hope that "it will help improve bilateral relations".
The announcement comes more than a week after South Korea sent top diplomats to Vienna for talks with US negotiators working to revive the 2015 Iran nuclear deal.
Tehran was South Korea's third-largest Middle Eastern trade partner before the United States unilaterally withdrew from a 2015 nuclear deal between Tehran and world powers and reimposed crippling sanctions.
Iran had been a key oil supplier to resource-poor South Korea and in turn imported industrial equipment, household appliances and vehicle spare parts from Seoul.
Last year, Iran threatened South Korea with legal action unless Seoul released the more than $7 billion in frozen funds for oil shipments.
On the sidelines of the nuclear talks last week, South Korea said that it was looking for ways to resolve the issue of frozen Iranian assets in Korea.
France, Germany and the UK are participating in the talks about the 2015 deal, along with Russia and China, while the United States is indirectly involved.