The RQ-4 Global Hawk, believed to be the drone shot down, is a high altitude, long-endurance craft (Picture: US Air Force).
US President Donald Trump has warned "Iran made a very big mistake" after an American military drone was shot down by an Iranian surface-to-air missile.
Iran's Revolutionary Guard earlier said it shot down the American drone over Iranian airspace, while US officials say the incident took place over the Strait of Hormuz, in international airspace.
US Central Command spokesperson Captain Bill Urban said reports that the unmanned aircraft was flying in Iranian airspace "are false", describing it as an "unprovoked attack".
President Trump posted a warning that Iran made a "very big mistake" on Twitter, before addressing the matter during a media conference.
"This drone was in international waters, clearly. We have it all documented," he said.
When asked how the US will respond, President Trump said: "You'll find out," before repeating his warning to Iran that "they made a very big mistake".
It is not the first time the US President has threatened Iran - last month he tweeted warning "the official end" of the country.
President Trump addresses Iran: "This drone was in international waters, clearly. We have it all documented . . . They made a very bad mistake." pic.twitter.com/tShg4LCRzc— The White House (@WhiteHouse) June 20, 2019
The drone shot down has been confirmed as a RQ-4A Global Hawk, which is a long-endurance remotely piloted aircraft that provides intelligence and surveillance.
Iran's state-run IRNA news agency said the US drone entered airspace near Kouhmobarak district in southern Iran's Hormozgan province.
The commander of Iran's Revolutionary Guard said the shooting down of the drone sent "a clear message" to America.
General Hossein Salami also said Iran "does not have any intention for war with any country, but we are ready for war".
Forces News' Defence Analyst Christopher Lee said the downing of the drone has "radically changed the picture".
"The other guy is very annoyed that you've done it because for two reasons," he said.
"One, you've taken an action against him that he was unprepared for and he failed. The second part of it is that hes got to respond in some way.
"So you've set up the response factor and in an era or in a time when a region is balancing itself whether there is going to be a war, or just do nothing, or its all posture, the response factor is everything."
There have been rising tensions between Tehran and Washington after US President Donald Trump accused Iran of sabotaging two oil tankers, and then subsequently announced the deployment of an additional 1,000 troops to the region earlier this week.
Iran denies involvement in the oil tankers incident.
The Pentagon has revealed that its latest deployment will to the region include a Patriot missile battalion, manned and unmanned surveillance aircraft and "other deterrence capabilities."
Iran recently has quadrupled its production of low-enriched uranium and threatened to boost its enrichment closer to weapons-grade levels, trying to pressure Europe for new terms to the 2015 deal.