It is hoped new incentives from key European powers Britain, France and Germany will be finalised within 10 days for presentation to Iran.
Mr Annan said: "It's important the Iranians remain open and that they back away from this aggressive posture and be open to discussion."
He expressed hope that once the package is put together by the Europeans, "the Iranians and the international community will be able to come to a clear understanding.
"They have a responsibility ... to assure the world that their intention is peaceful," he said, adding: "No one is saying they are not entitled to peaceful use of nuclear energy."
Diplomatic efforts
The UN Security Council's five veto-wielding members - Britain, China, France, Russia and the United States - failed this week to agree on a Franco-British draft resolution that would legally require Tehran to heed repeated UN demands to halt nuclear enrichment activities that could be used to build nuclear weapons.
Russia and China oppose punitive measures against Iran, with which they have close trading ties.
"Everybody seems to realize we need to intensify diplomatic efforts and find a solution," Mr Annan said. "I hope in the meantime we will reduce the level of rhetoric on this issue."
The UN chief said the 15-member Security Council was trying to find a solution that "the council as a whole can unite behind."
"On these kinds of issues, the council has a greater voice when it speaks with one voice, and I hope they will be able to find a solution," he said.
He reiterated that direct talks between Tehran and Washington would help resolve the nuclear standoff.
Tehran denies Western allegations that it is secretly trying to acquire nuclear weapons and says it is entitled to conduct uranium enrichment as a signatory of the nuclear Non-Proliferation Treaty.
Indonesian support
The claim was backed this week by Indonesian President Susilo Bambang Yudhoyono during a visit to Jakarta by Iranian president Mahmoud Ahmadinejad.
Mr Annan also said that his good offices as secretary general "are always available".
Earlier this week, US Secretary of State Condoleezza Rice said Washington would wait "a couple of weeks" before pressing for tough UN action against Iran, while European negotiators draft new incentives for Tehran to renounce its controversial nuclear activities.
She added that Iran would face "isolation" if it did not establish a nuclear program that meets international standards.
Speaking after talks with Javier Solana, the European Union's foreign policy chief, Ms Rice stressed that Iran faced a UN Security Council resolution over its nuclear program, which Washington and its allies believe hides efforts to build a nuclear bomb.
"We will have Security Council action," Rice said. "The issue is that Iran knows that there are two options that have been there all along, which is they can have a civil nuclear program that is appropriate and the international community can support, or they can face isolation."
French Prime Minister Dominique de Villepin ruled out military action against Iran to halt its disputed nuclear program during a visit to London on Wednesday.
"We hope to be able to broach a Security Council resolution quickly," Mr de Villepin said before joining his British counterpart Tony Blair for dinner. "We are working with two kinds of measures, (including) a firm measure, even if we exclude military action," he said.
If Iran respects its international obligations, he added, "certainly we will be able to offer incentives, such as civilian nuclear assistance."
Mr Blair said that the question of Iran's program to enrich uranium -which Western powers fear could be used for weapons production despite Iranian insistence that it is peaceful - would be raised during their dinner.
The British prime minister is also reluctant to see military intervention to resolve the problem.
Diplomats said negotiators from the Council's five permanent members plus Germany would meet in London on May 19 to consider new incentives as well as sanctions if Iran does not halt suspected efforts to build a nuclear bomb.