Iran will take back failed asylum seekers "with pride" but only if they return voluntarily from Australia.
Foreign Minister Julie Bishop held wide-ranging formal talks with Iran's Foreign Minister Javad Zarif in Canberra on Tuesday during the first visit by a senior Iranian minister in 13 years.
The pair discussed combating people-smuggling, boosting trade ties and global security issues.
Following the meeting, Dr Zarif said it was within Canberra's legal right to deport Iranians.
"We cannot force anybody to come back to Iran but if anybody wants to come back voluntarily, we always take our citizens with pride," he told reporters.
The prospects of securing a deal for the mandatory return of 9000 failed asylum seekers to Iran is looking slim with negotiations still in early stages.
A group of 30 Iranian democracy supporters rallied on the lawns of Parliament House protesting human rights abuses and the execution of political prisoners including women and children.
"Our message to the foreign minister is clear, stop the hangings in Iran, stop killing innocent people," spokesman Mohammad Sadeghpour told AAP.
Dr Zarif said he was happy to talk about human rights but warned about the need for a more serious approach to discussions.
"Where human rights does not become an instrument of political pressure," he said.
Ms Bishop also raised Iran's controversial missile tests - namely the political circumstances surrounding the timing and how Iran was being perceived by the global community.
She said the proper legal process was for the UN Security Council to consider the matter.
Dr Zarif launched a staunch defensive of his country's tests, saying they were not illegal.
Iran would not use the missiles against other nations - except in self-defence, he said.
Combating Islamic State was also top of its agenda.
Dr Zarif said Iran sought a political solution to the Syrian crisis but a ceasefire would never include terrorists.
"I do not think anybody should consider Daesh or other extremist organisations as a leverage even for temporary political gains."
The federal opposition warned the government to exercise caution dealing with Iran.
Labor MP Michael Danby, who also met with Dr Zarif, said he was concerned Iran remained opposed to recognising the state of Israel.
Australia could boost trade ties but that shouldn't come at the expense of keeping silent on issues, he told Sky News.
WHAT THE MINISTERS TALKED ABOUT:
* Defeating IS and Syria solution.
* Trade ties - AUSTRADE to reopen Tehran office.
* Attracting more Iranian tourists to Australia.
* Boosting education opportunities.
* Defeating people-smuggling trade.
* Iran's agreement to halt nuclear testing in exchange for trade ban lift last year.
