Iran and North Korea are working together to develop ballistic missiles and have made significant progress, the head of the Pentagon's Missile Defence Agency says.

"It really is an international effort going on out there to develop ballistic missile capability between these countries," Army Lieutenant General Patrick O'Reilly told a forum on Capitol Hill.

Both Iran and North Korea are at odds with much of the international community over their nuclear programs, and North Korea has tested an atomic bomb.

Each has demonstrated a capability to launch missiles with more than one stage, critical to more advanced systems.

They are sharing know-how on avionics, propulsion and materials, among other things, Lt Gen O'Reilly said.

"We've seen it for years and it continues," he said of such cooperation between North Korea and Iran, whose Shahab missiles are widely reported to be based on North Korean designs.

Their ability to fire missiles with a stable ignition and launch a second stage represents "a significant step forward" for both of them, he said.