For nearly a quarter of a century, Iran's hard-line religious leaders have referred to Washington as the Great Satan.

The United States has accused Iran of sponsoring terrorist groups and secretly trying to build a nuclear weapons program. Two years ago, President Bush called Iran part of an "Axis of Evil."

Since his 1997 election, Iran's pro-reform president, Mohammad Khatami, pursued a foreign policy aimed at repairing Iran's tarnished image in the world. The efforts paid off with European governments, which initiated what they call a "critical dialogue" to improve ties and influence.

The awarding of the 2003 Nobel Peace Prize to Iranian human rights activist Shirin Ebadi highlighted the work of Iran's reformers. But hard-liners within Tehran's religious leadership have blocked attempts to thaw relations with the world's remaining superpower.

Strategic analyst Anthony Cordesman of the Center for Strategic and International Studies supports the idea of outside pressure to help foster changes inside Iran. But he recently told the U.S. Senate's Foreign Relations Committee that a tough U.S. attitude might undercut Washington's ability to encourage reforms there.

"We have tended to demonize Iran rather than to try to influence it or create a dialogue," he said. "We have made it into a political symbol that has weakened its moderates and strengthened its hard-liners rather than influenced and changed its behavior."

Professor Shaul Bakhash of George Mason University says that confrontational attitude appears to be changing. "The regime in the last four or five years has decided to reintegrate itself in the international community and normalize its relationships with as many countries as possible," he said. "And they seem to think in Tehran that some kind of understanding with this administration in the United States is possible. Let us say immediately that the problems on both sides remain very serious and difficult to surmount."

Still, there has been movement on both sides. Analysts point to Iran's recent agreement to open its nuclear programs to more intrusive international inspection.

Washington still accuses Iran of sponsoring Middle East terrorism. But unofficial cultural and sports exchanges have quietly expanded. And, the U.S. administration recently eased its economic sanctions to rush relief aid to victims of a devastating earthquake.

Mr. Bakhash says the presence of U.S. troops in neighboring Afghanistan and Iraq has forced Tehran to rethink its policies, too.

"Like many other countries, Iran is repositioning itself in light of these new regional realities," he said. "I don't think there are signs of panic as a result of U.S. occupation of Iraq, but rather looking at the new realities and adjusting Iranian policy as a result of that."

Even with the signals of a diplomatic thaw, analyst Rassoul Nafissi of Strayer University in Virginia does not expect any immediate changes. "There are voices on both sides asking for political change, but I don't think it's going to happen soon," he said. "Besides, I think everything depends on the coming elections. When the elections take place in Iran and the United States, we will see how the new initiatives are taken."

Iranian reformers face a challenge for power in the parliament in elections later this month, after the conservative oversight council disqualified hundreds of pro-reform candidates. A loss of influence for reformers in the parliament could weaken their movement and any momentum toward repairing U.S.-Iranian relations.