* Iran, six powers to meet again in March - Iranian official
* Agreement on agenda would mark step forward
* But sides remain far apart on how to resolve dispute
* Negotiations expected to last for months (Adds Western diplomat confirming agenda agreed)
By Parisa Hafezi and Louis Charbonneau
VIENNA, Feb 20 (Reuters) - Iran and six world powers have agreed on an agenda for negotiations over Tehran's nuclear programme and will meet again in the second half of March in Vienna, a senior Iranian official said after two days of talks in the Austrian capital.
Although modest in scope, the agreement on an agenda indicates an early step forward in the elusive search for a settlement of the decade-old dispute.
However, the sides remain far apart on how to resolve the dispute and both Iran and the United States have publicly stated it may not be possible to reach a final agreement.
Negotiators from Iran and the powers - the United States, France, Germany, Britain, China and Russia - have been meeting since Tuesday in Vienna to hammer out an agenda for talks on a final deal to the standoff over Tehran's atomic activities.
Iranian Deputy Foreign Minister Abbas Araqchi told the official IRNA news agency: "The involved parties have agreed on an agenda and a framework and the next round of talks will be in the second half of March in Vienna."
The semi-official Iranian news agency Fars said the next round of meetings would be held from March 17-20.
"We've agreed a rough schedule and a set of issues we will tackle," a Western diplomat told Reuters on condition of anonymity.
A senior U.S. state department official said of Wednesday's second day of talks: "Today's discussions, which covered both process and substance, were constructive and useful."
Araqchi's statement was also carried by Iran's English-language Press TV state television on its web site.
The meeting was due to resume early Thursday with a news conference expected later by EU foreign policy chief Catherine Ashton - who is coordinating the talks on behalf of the powers - and Iranian Foreign Minister Mohammad Javad Zarif.
The six powers want a long-term deal on the permissible scope of Iran's nuclear work to lay to rest concerns that they could be put to developing atomic bombs. Tehran's priority is a complete removal of damaging economic sanctions against it.
The negotiations will likely extend at least over several months and could help defuse many years of hostility between energy-exporting Iran and the West. They could also ease the danger of a new war in the Middle East, transform the regional power balance and open up Iran to Western firms.
The Arms Control Association, a U.S.-based research and advocacy group, said that if a common understanding had been reached on the issues that needed to be addressed "it is an important step forward that makes it more likely the two sides can arrive at a realistic, comprehensive deal in the next 6-12 months".
The powers have yet to spell out their precise demands of Iran. But Western officials have signalled they want Tehran to cap enrichment of uranium at a low fissile concentration, limit research and development of new nuclear equipment, decommission a substantial portion of its centrifuges used to refine uranium, and allow more intrusive U.N. nuclear inspections.
Such steps, they believe, would help extend the time Iran would need to make enough fissile material for a bomb and make such a move easier to detect before it became a fait accompli. Tehran says its programme is peaceful and has no military aims.
Wide differences over expectations remain, however. Araqchi was cited by Press TV on Tuesday as saying Iran would not agree to dismantle its nuclear installations.
The talks could also stumble over the unfinished heavy-water reactor in Arak that Western states worry could yield plutonium for bombs, and the Fordow uranium enrichment plant, built deep underground to ward off any threat of air strikes.
During a decade of on-and-off dialogue with world powers, Iran has rejected Western allegations that it has been seeking the means to build nuclear weapons. It says it is enriching uranium only for electricity generation and medical purposes.
As part of a final deal, Iran expects the United States, the European Union and the United Nations to lift painful economic sanctions on the oil-dependent economy. But Western governments will be wary of giving up their leverage too soon.
The six powers hope for a deal by late July, when November's interim accord - under which Tehran suspended higher-level enrichment in return for some sanctions relief - expires.
That deal was made possible by the election of relative moderate President Hassan Rouhani on a platform of relieving Iran's international isolation by engaging constructively with its adversaries. (Additional reporting by Louis Charbonneau, Justyna Pawlak and Fredrik Dahl; Editing by Jon Boyle)
Our Standards: The Thomson Reuters Trust Principles.