The aggressive new policy came in response to intelligence that Iran is supporting terrorists inside Iraq and is providing bombs — known as improvised explosive devices — and other equipment to anti-U.S. insurgents.
"The president and his national security team over the last several months have continued to receive information that Iranians were supplying IED equipment and or training that was being used to harm American soldiers," National Security Council spokesman Gordon Johndroe said.
"As a result American forces, when they receive actionable information, may take the steps necessary to protect themselves as well as the population," Johndroe said.
For more than a year, U.S. forces in Iraq have been catching Iranian agents, interviewing them and letting them go. A report in Friday's Washington Post says the administration is now convinced that was ineffective because Iran paid no penalty for its mischief.
As one senior administration official told the Post, "There were no costs for the Iranians. They are hurting our mission in Iraq, and we were bending over backwards not to fight back."
It is unknown whether U.S. forces have killed any Iranian operatives to date. Officials told the newspaper that about 150 Iranian intelligence officers, along with members of Iran's Revolutionary Guard, are active inside Iraq, though there is no evidence that these Iranian operatives have directly attacked U.S. forces in Iraq, the officials said.
In a recent Senate hearing, CIA director Gen. Michael V. Hayden noted that for the past three years, Iran has offered Shiite militias weapons and intelligence training and said there was a "striking" amount of Iranian-supplied materiel used against U.S. troops.
"Iran seems to be conducting a foreign policy with a sense of dangerous triumphalism," Hayden said.
In addition to the stated goal of reducing violence in Iraq, the kill-or-capture order is aimed at reducing Iran's influence with Hamas and Hezbollah and among Shiites in western Afghanistan.
One senior official also told the Post that the Bush administration's plans contain five "theaters of interest" designed to target Iranian interests across the Middle East.
Mr. Bush referred to the new policy in his Jan. 10 address to the United States in which he announced a buildup of 21,500 troops in Iraq. He said the United States would confront Iran and Syria more vigorously.
"These two regimes are allowing terrorists and insurgents to use their territory to move in and out of Iraq," he said in that address. "Iran is providing material support for attacks on American troops. We will disrupt the attacks on our forces. We'll interrupt the flow of support from Iran and Syria. And we will seek out and destroy the networks providing advanced weaponry and training to our enemies in Iraq."
While promising tougher action, the White House said the United States does not intend to cross the Iraq-Iran border to attack Iranians.