It said the five-day drill will cover an area a third of the size of Iran and spread across the central, western and southern parts of the country.
Gen. Ahmad Mighani, head of an air force unit in charge of responding to threats to Iran's air space, said Saturday the war games would cover regions where Iran's nuclear facilities are located.
CBS News Foreign Affairs Analyst Pamela Falk, who is based at the United Nations, said the war games are intended to show the United States and Israel that it would protect its nuclear facilities against a preemptive attack.
The drill involves Iran's elite Revolutionary Guard, the paramilitary Basij forces affiliated with the Guard as well as army units.
The United States and its European allies accuse Iran of embarking on a nuclear weapons program. Iran denies the charge and insists the program is only for peaceful purposes.
"Yet again, Iran appears to be running out the clock - in other words, stalling any agreement with the U.S. and the U.N., while they increase the possibility of having the ability to produce nuclear weapons," Falk said.
Falk said the U.S. and the U.N. have given Iran a 'make it or break it' deadline of the end of the year on the deal offered to Iran to export uranium before it will attempt to impose new sanctions.
"The core of the issue for Americans is whether or not the Obama administration's diplomatic efforts will be able to bring the Iranians around, to limiting their nuclear program," Falk said. "The U.S., Western nations, and the International Atomic Energy Agency are all losing patience."
Israel has not ruled out military action to stop Iran from obtaining nuclear weapons.
The commander of the Guard's air force, Gen. Amir Ali Hajizadeh, meanwhile sought on Sunday to play down the significance of Israel's threats against his country, saying they amounted to psychological warfare.
"We are sure they are not able to do anything against us since they cannot predict our reaction," Hajizadeh was quoted as saying by the Guard's official Web site, Sephahnews.
"If their fighter planes could escape from Iran's air defense system, their bases will be hit by our devastating surface-to-surface missiles before they land," he said.
Also on Sunday, Iran's defense minister, Gen. Ahmad Vahidi, said Iran planned to pursue designing and producing its own air defense missiles, according to the official IRNA news agency.
His comments were apparently in response to the delay in the delivery from Russia of S-300 anti-aircraft missiles, meant to be a key component of Iran's air defense.
Iran complains that the delay is apparently the result of Israeli and U.S. pressure.
Israel and the United States have opposed the missile deal out of fear Iran could use the system to significantly boost air defenses at its nuclear sites - including its main uranium enrichment plant at Natanz.
"President Obama may have encouraged Russia to delay the delivery of advanced air defense missiles to Iran but neither his Asia trip nor back-channel negotiations appear to have gotten China or Russia to support a new round of punishing sanctions at the U.N., leaving the option of a preemptive strike by the U.S. or Israel on the table," Falk said.
Commenting on this week's war games, a senior Obama administration official urged Iran to engage with the international community.
"We would prefer that the Iranian regime follow through on their offer to engage," said Ellen Tauscher, the U.S. undersecretary of state for arms control and international security.
"It is more important for them to build confidence with the international community," she said at a news conference Sunday at the Halifax International Security Forum in Nova Scotia.