"While we have made tangible progress on some of the issues and have worked together on a text (for a deal)... there are still significant gaps on some core issues," lead negotiator and EU foreign policy chief Catherine Ashton said, adding the talks would continue until November 24.
As part of the deal, the United States said it would unblock some $2.8 billion in frozen funds, in return for Iran converting a quarter of its 20% enriched uranium stocks -- which can be used to make a bomb -- into fuel.
American officials will leave Vienna over the weekend with the aim of resuming talks, perhaps at expert level, in August. The UN general assembly in September is also expected to provide a "fulcrum" for the next phase of negotiations, one US administration official said.
In a statement repeated in Farsi by Iranian foreign minister Mohammad Javad Zarif, Ashton said the parties would "reconvene in the coming weeks... with the clear determination to reach agreement... at the earliest possible moment".
In November last year Iran and the five permanent members of the UN Security Council plus Germany agreed an interim deal under which the Islamic republic froze certain nuclear activities for six months in return for some sanctions relief.
This expires on July 20, but the parties had given themselves the option to push back this deadline if they failed during the six months to transform the interim deal into a lasting accord.
US Secretary of State John Kerry, who this week spent two days in Vienna trying to broker a breakthrough, said Friday the "short extension" was "warranted by the progress we've made and the path forward we can envision".
"To turn our back prematurely on diplomatic efforts when significant progress has been made would deny ourselves the ability to achieve our objectives peacefully," Kerry said.
The deal would ease fears that despite its denials Iran is seeking to develop nuclear weapons after a decade of atomic expansion.
The deal under negotiation is highly ambitious and fiendishly complex.
The six powers want Iran to dramatically reduce its nuclear programme for a lengthy period of time and agree to more intrusive UN inspections.
This would expand the time needed for Tehran to develop a nuclear weapon, while giving the world ample warning of any such "breakout" push.
The two sides are believed to have narrowed their positions in recent weeks on a few issues such as the Arak reactor, which could give Iran weapons-grade plutonium, and enhanced inspections.
But they remain far apart on the key issue of Iran's capacities to enrich uranium, a process which can produce fuel for reactors but also the core of a nuclear bomb.
Unlocking of funds
Kerry said on Friday that under the terms of the new extension, Washington would unblock some $2.8 billion in frozen Iranian funds.
In return Iran's partial nuclear freeze would continue and it will take further steps including turning medium-enriched uranium into reactor fuel.
"Once the... material is in fuel form, it will be very difficult for Iran to use this material for a weapon in a breakout scenario," Kerry said.
"Let me be clear: Iran will not get any more money during these four months than it did during the last six months, and the vast majority of its frozen oil revenues will remain inaccessible," he said.
US officials said that in the past six months a further $25 billion had been earned in Iranian oil sales, which had been added to about $100 billion already frozen in accounts around the world.
But both the US and Iran face tough domestic pressure.
US lawmakers, who are widely supportive of Iran's arch enemy Israel, have threatened to ramp up sanctions without what they see as a sufficiently rigorous agreement.
"It looks like the Iranians won extra time with a good cop, bad cop routine," said Representative Ed Royce, chairman of the House Foreign Affairs committee.
But senior US administration officials reiterated that they opposed any new sanctions for the time being, arguing diplomacy should still be given a chance to work.
"We have vigorously enforced the sanctions regime that remains in place, and will continue to do so throughout the duration of this extension," said White House spokesman Josh Earnest in a statement.
"We will not accept anything less than a comprehensive resolution that meets our objectives, which is why it is necessary for negotiations to continue."
Iran's negotiators in turn face pressure from hardliners, who view the United States as the ultimate enemy and oppose any agreement seen as a concession.