Iran did not immediately comment on Israel's announcement it had killed Ali Larijani, widely viewed as one of Iran's most powerful figures and a confidant of slain Supreme Leader Ayatollah Ali Khamenei and his son and successor Mojtaba.
In a sign of Iran's continued defiance after more than two weeks of war, the senior Iranian official who asked not to be identified said the younger Khamenei had rejected proposals that were conveyed to Iran's foreign ministry for "reducing tensions or ceasefire with the United States".
The official did not give further details.
The official said Mojtaba Khamenei had held his first foreign policy session since being named supreme leader, and had declared that it was not "the right time for peace until the United States and Israel are brought to their knees, accept defeat and pay compensation".
He did not clarify whether the younger Khamenei, who has not yet appeared in photos or on TV since being named last week to replace his slain father, had attended the meeting in person or remotely.
The US-Israeli war on Iran is now in its third week, with at least 2000 people killed and no end in sight.
The Strait of Hormuz remains largely closed off and allies have rebuffed US President Donald Trump's calls for them to help reopen the vital waterway, through which about 20 per cent of global oil and liquefied natural gas flows.
Trump has called on allies to provide military assistance to ease the global economic effects by reopening the strait.
Most NATO allies have informed the US they do not want to get involved in the conflict, Trump said on Tuesday, describing their position as "a very foolish mistake".
"Because of the fact that we have had such Military Success, we no longer 'need,' or desire, the NATO Countries' assistance - WE NEVER DID!" Trump wrote on social media, also singling out Japan, Australia and South Korea.
European Union foreign policy chief Kaja Kallas said in an interview with Reuters on Tuesday that nobody was ready to risk the lives of their people in protecting the strait.
"We have to find diplomatic ways to keep this open so that we don't have a food crisis, fertilisers crisis, energy crisis as well," Kallas said.
The killing of Larijani in an Israeli strike, if confirmed, would make him the most senior figure killed by Israel and the United States since the war's first day when they killed the supreme leader, other members of his family and other senior officials.
Larijani was close to the slain leader but also had a reputation for pragmatic relations with other factions in the ruling system.
Israel said it had also killed another top official, Gholamreza Soleimani, who led the volunteer Basij militia, which plays a major role in domestic security.
Iranian state media confirmed Soleimani's death but did not say whether Larijani was still alive.
In a video posted on social media, Israeli Prime Minister Benjamin Netanyahu pulled a small card out of his suit jacket pocket and said: "Today I erased two names on the punch card, and you see how many more to go on this batch."
The Israeli military said it was targeting "Iranian regime infrastructure" with strikes across Tehran as well as Hezbollah sites in Beirut.
Foreign Minister Gideon Saar said Israel "had, in effect already won the war", but gave no timeline for when the war might end.
The head of the United States' National Counterterrorism Center, Joseph Kent, resigned on Tuesday, saying in a letter to Trump that he "cannot in good conscience" back the US war in Iran.
Iran "posed no imminent threat to our nation, and it is clear that we started this war due to pressure from Israel and its powerful American lobby," Kent said in a social media post.
with AP
