UPDATE 1-Saudi Takes Iran to U.N. over Alleged Plot

* Saudi reports Iran to U.N. over alleged plot

* Tehran denies planning to kill Saudi ambassador in Washington

* Iran says plot claim is designed to isolate it (Adds comments by Iranian president, foreign ministry)

DUBAI/TEHRAN, Oct 16 (Reuters) - Saudi Arabia has taken a first step to have Iran reported to the United Nations Security Council, a move that could lead to new sanctions, but Tehran dismissed allegations it plotted to kill a top Saudi envoy as a ploy to isolate it.

"Saudi Arabia's permanent mission to the United Nations... formally requested the United Nations Secretary General notify the Security Council of the heinous conspiracy," the Asharq al-Awsat newspaper reported, citing a statement from the kingdom's U.N. mission.

The United States on Tuesday said it had uncovered a plot by two men with links to Iran's security forces to assassinate the Saudi ambassador to the United States, Adel al-Jubeir, by planting a bomb in a Washington restaurant.

One of the men, who allegedly paid a U.S. undercover agent posing as a Mexican drug cartel hitman to carry out the assassination, has been arrested while. The United States says the other is in Iran.

Iran's leadership says the allegation has been cynically engineered to further isolate Tehran -- whose disputed nuclear programme has triggered several rounds of international sanctions against it.

"All these pressures are aimed at stopping us from advancing," Iran's hardline President Mahmoud Ahmadinejad was quoted as saying on Sunday by the official IRNA news agency reported.

Iran's Supreme Leader Ayatollah Ali Khamenei on Saturday said the alleged plot was a "meaningless and nonsensical accusation".

The Saudi step follows remarks by U.S. President Barack Obama that he would press for "the toughest possible sanctions" against Iran over the alleged plot, and vowed not to take any options off the table - a phrase commonly used to mean the possibility of using force.

Saudi Foreign Minister Prince Saud al-Faisal said on Wednesday in Vienna that Iran "was responsible" for the alleged plot and said Riyadh would adopt a "measured response".

Iran's Foreign Minister spokesman, Ramin Mehmanparast said such "unfriendly" comments were based on U.S. allegations for no which proof had been presented.

"The aim of this American-designed scenario is to hurt Iran's relations with its neighbours and it is wise not to make any hasty and unstudied comments," Mehmanparast was quoted as saying on Sunday by the labour news agency ILNA news agency.

Tensions between Shi'ite Muslim Iran and Sunni Saudi Arabia have risen in recent months as Arab uprisings have altered the balance of power in the Middle East.

Saudi Arabia earlier this month appeared to blame Iran, without naming it, for instigating clashes between members of the kingdom's Shi'ite minority and security forces on Oct 3 in which 14 people were injured. (Reporting By Angus McDowall; editing by Sami Aboudi and Jon Boyle)