Announcement comes as US sanctions 14 Iranian individuals, entities.
Trump said in a statement that he is extending relief "only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal", keeping the agreement alive, for now.
"This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately," Trump said in an unusually lengthy statement.
The waiver Trump signed off on Friday must be issued every 120 days, which means the U.S. will continue to honor its obligations under the Joint Comprehensive Plan of Action (JCPOA) at least through the spring.
"No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge," Trump said.
An official who spoke to reporters on the condition he not be named said Trump "intends to work with our European partners on some kind of follow-on agreement" to the nuclear deal struck in 2015 between Iran and world powers, including the U.S.
The JCPOA placed widespread curbs on Iran's nuclear program and subjected it to an inspections regime hailed at the time as "unprecedented" by U.S. officials. In exchange, Iran received billions of dollars in sanctions relief.
Trump said the funds were used as a "slush fund for weapons, terror, and oppression".
The president wants new revisions to include "certain triggers" related to Iran's ballistic missile program and its nuclear breakout timeline in the new agreement, and wants to remove the JCPOA's "sunset clause", which envisions the lifting of restrictions on Iran's nuclear program in 2025, the official said.
The U.S. will negotiate the new parameters with its European allies only, not Iran, according to the official.
"It would be an agreement amongst the United States and our European partners to reimpose multilateral sanctions should the Iranians surpass the new triggers that we would lay out," he said.
Nikki Haley, the U.S.'s UN envoy lauded Trump's decision, saying that if Washington cannot achieve Trump's aims "it will become even clearer that the nuclear deal is an impediment to peace".
"Here at the UN, we look forward to gaining new international cooperation to strengthen actions against Iranian missile activity, enforce arms embargoes that Iran violates, crack down on Iranian sponsorship of terrorism, and continue to shine a light on Iranian human rights violations," Haley said in a statement. "All of those steps can be taken outside of the nuclear deal, but if we cannot achieve international consensus on them, then it will become even clearer that the nuclear deal is an impediment to peace."
"We must not allow the Iranian regime to use the nuclear deal to provide it with cover to violate all manner of international norms and UN resolutions," she added.
The U.S. further sanctioned 14 individuals and entities Friday for what the Treasury Department called "serious human rights abuses and censorship in Iran, and support to designated Iranian weapons proliferators.”
Among those blacklisted is the head of Iran's judiciary, Sadegh Amoli Larijani. The Treasury Department said in his official capacity Larijani is responsible for "ordering, controlling, or otherwise directing, the commission of serious human rights abuses against persons in Iran or Iranian citizens or residents"
Also slapped with the penalties were the Iranian Revolutionary Guards Corps' Electronic Warfare and Cyber Defense Organization, and Chinese national Shi Yuhua.
Yuhua was blacklisted for "selling navigation-related equipment" to a designated Iranian company, the agency said.
The Treasury Department also designated what it called an "Iran- and China-Based Procurement Network" called Pardazan System Namad Arman (PASNA).
"Iran-based PASNA has sought to procure various types of lead zirconium tritanate (PZT) items valued at hundreds of thousands of dollars from China-based Bochuang Ceramic, Inc. on behalf of Iran's ECI," it said, referring to Iran's Electronic Components Industries.