A senior Iranian official says the government may resign if it cannot resolve a political crisis sparked by the conservative Guardian Council's decision to bar hundreds of reformists from running in next month's elections.

Iran's official IRNA news agency quotes Vice President Mohammad Sattarifar as saying there is no reason for the government to remain in office if it feels that it can not ensure free elections. But he said the government still hopes to resolve the issue.

The Guardian Council has disqualified more than three-thousand prospective candidates, including more than 80 sitting members of parliament, or Majlis.

The Guardian Council - an unelected, 12-member constitutional watchdog body, dominated by Islamic hardliners - has not explained its action. But news reports say some reformists were banned for alleged disloyalty to Islam.

Reformist lawmakers continued a protest sit-in at the parliament building on Monday. Senior officials said all 27 provincial governors now holding office wrote a letter to President Mohammad Khatami threatening to resign unless the Guardian Council's decision is reversed within one week.

President Khatami, a reformist himself, has appealed for calm and says he will pursue legal action to lift the ban.

But Iran's supreme leader, Ayatollah Ali Khamenei, says that all legal steps must be exhausted to resolve the impasse before he would step in with a solution.

Monday, the U.S. State Department urged the Iranian government to disavow what it called attempts "to shape the outcome" of next month's elections.