Editor's note: The FBI and the DEA have disrupted a plot involving Iran to kill the Saudi ambassador to the United States and commit other attacks, according to the U.S. Justice Department. Two men - one arrested, the other at large - have been charged in connection with the plot, which the Justice Department says was directed by elements of the Iranian government.

The Justice Department says one of the men - Manssor Arbabsiar, a naturalized U.S. citizen holding an Iranian passport - arranged to hire for the assassination someone in Mexico who he thought was an associate of a drug trafficking cartel. The person in Mexico actually was a DEA confidential source who was posing as a cartel associate, the Justice Department says.

Follow below for the latest developments and read the Justice Department complaint (PDF).

[Updated at 8:09 p.m. ET] In their investigation into an alleged plot to kill Saudi Arabia's ambassador to the United States, federal agents interrogated suspect Manssor Arbabsiar for 12 days, a senior counterterrorism official said Tuesday.

Cooperation from Mexican officials played a key role in the investigation, the official said. U.S. authorities arranged with Mexican officials for Arbabsiar to be denied entry into Mexico, the official said.

From there, he was placed on an airplane to New York, where he was taken into custody and quietly taken to a U.S. government facility, the counterterrorism official said. U.S. authorities interviewed him there every day and compiled dozens of intelligence reports.

[Updated at 8:04 p.m. ET] Georgia Sen. Saxby Chambliss released a statement Tuesday, congratulating the FBI, DEA and other federal agencies involved in the case.

"While I believe our justice system will deal appropriately with the defendant in custody, our government must also deal with the Iranian regime," Chambliss said. "In addition to allegedly sponsoring this plot, Iran has supported and provided weapons for attacks on our soldiers in Iraq and Afghanistan. This has continued far too long with no repercussions."

[Updated at 7:41 p.m. ET] Iran's UN Ambassador Mohammad Khazaee responded to U.S. accusations that the Iranian government was involved in a murder-for-hire plot Tuesday night, telling CNN's Erin Burnett that the whole thing was "a lie."

“The whole issue is a provocation against Iran," Khazaee said. "We strongly reject this accusation," he said, suggesting that the narrative was a "blatant" ploy by Washington to terrorize the American public.

[Updated at 7:41 p.m. ET] Tom Kean, former chairman of the 9/11 Commission said the alleged plot "surprises me." Speaking to CNN's Erin Burnett, Kean said the plot is "pretty close to an act of war. You don’t go in somebody’s capital to blow somebody up.”

[Updated at 7:07 p.m. ET] New York Rep. Peter King, speaking to CNN’s Erin Burnett, said the alleged Iranian plot should be taken seriously by U.S. officials. “This would have been an act of war [if carried out]. It has raised this relationship, between the United States and Iran, to a very precipitous level,” King said.

“This violates all international norms, it violates all international laws. ... We can’t allow this to go without a strong reaction," King, who chairs the Homeland Security Committee," told CNN.

After saying he would back whatever action the administration might take, King said “we should at least consider a sign of military action. ... something to indicate how seriously we're taking this." He added that U.S. officials should even consider removing Iranian diplomats from the country. “I think everything should be kept on the table.”

[Updated at 6:52 p.m. ET] A spokesman for Iranian President Mahmoud Ahmadinejad said Tuesday that the alleged plot was "a child's story" and "a fabrication."

The Iranian government was awaiting details about the accusations, spokesman Ali Akbar Javanfekr said. He suggested U.S. authorities were attempting to distract American citizens.

"They want to take the public's mind off the serious domestic problems they're facing these days and scare them with fabricated problems outside the country," he said.

[Updated at 6:40 p.m. ET] Mexican immigration officials blocked Manssor Arbabsiar, now accused of plotting to kill Saudi Arabia's ambassador to the United States, from entering Mexico last month, Mexico's foreign ministry said in a statement released Tuesday.

Mexican immigration authorities blocked his entry because of an arrest warrant issued by the United States, the foreign ministry said. U.S. authorities later arrested him in New York, it said.

[Updated at 5:57 p.m. ET] U.S. National Security Adviser Tom Donilon in recent weeks went to Saudi Arabia to brief Saudi King Abdullah on the terror plot, a senior administration official familiar with the terror plot said, according to CNN Chief Political Analyst Gloria Borger.

The Saudis were “outraged" not only because of the plot, but because the ambassador is "someone who is close to the king,” the official said.

The Obama administration has specific information tying senior officials in Iran's Quds Force - a special unit of the Iranian Islamic Revolutionary Guard Corps - the official said. One question, according to the official, is whether the Quds officials were freelancing or got approval from senior officials in the Iranian regime.

The administration intends to “go to other countries and say this is a serious escalation of Iran’s use of political violence,” the official said. “Some may build on their sanctions; some could cut off relations with the IRGC.”

[Updated at 5:37 p.m. ET] Mexico's foreign ministry, explaining why Arbabsiar was denied entry into Mexico on September 28, says Mexican immigration officials blocked him because of an arrest warrant issued by the United States.

U.S. authorities arrested Arbabsiar a day later in New York, where he had flown after being denied entry into Mexico, the U.S. Justice Department has said. The Justice Department says Arbabsiar had intended to go to Mexico to guarantee final payment for an assassination of the Saudi ambassador to the United States. Arbabsiar had arranged to hire someone for the assassination that he thought was a drug cartel associate, but actually was a DEA confidential source, the Justice Department says.

"In strict compliance with domestic and international law, Mexico was able to neutralize a significant risk to Mexico’s national security, while at the same time reinforcing bilateral and reciprocal cooperation with the United States," the Mexican foreign ministry said in a statement released Tuesday. "This operation confirmed that adequate mechanisms and procedures are in place to anticipate and prevent the presence in Mexico of individuals that pose a risk to national security and interests."

[Updated at 5:03 p.m. ET] U.S. Secretary of State Hillary Clinton told reporters that the United States "will be consulting with our friends and partners around the world about how we can send a very strong message that this kind of action, which violates international norms, must be ended."

She also said the United States would consult with nations about possibly taking measures to "further isolate (Iran) from the international community."

[Updated at 4:52 p.m. ET] A preliminary hearing has been set for October 25 for Manssor Arbashiar, who is alleged in a federal complaint to be involved in a terror plot to kill the Saudi Ambassador to the United States, according to CNN's Jason Carroll.

The U.S. Justice Department alleges that Arbashiar, a naturalized U.S. citizen who holds an Iranian passport, arranged to hire someone in Mexico he thought was a drug cartel associate to assassinate the Saudi ambassador to the United States. That person in Mexico actually was a DEA source posing as a cartel associate, the department says.

Arbashiar, 56, was arrested on September 29 at New York's John F. Kennedy Airport, where he flew to after being denied entry into Mexico a day earlier, the Justice Department says. The department says Arbashiar had intended to go to Mexico to guarantee final payment for the assassination.

The Justice Department alleges that the second man who has been charged - Gholam Shakuri, who the department says is an Iran-based member of Iran's Quds Force - and other co-conspirators were aware of and approved of the plan. Shakuri is at large, the department says.

With Shakuri's approval, Arbashiar arranged to wire about $100,000 to a U.S. bank account for the DEA source as a down payment for the assassination, according to the Justice Department. The total price was set at $1.5 million, according to the department.

According to the Justice Department, Arbashiar and the DEA source discussed carrying out the assassination with explosives, possibly by bombing a U.S. restaurant that the Saudi ambassador frequented. When the source told Arbashiar that others - including U.S. senators that visit the restaurant - could be killed, Arbashiar allegedly dismissed those concerns as "no big deal," the department says.

[Updated at 4:42 p.m. ET] The chairman of the U.S. House Permanent Select Committee on Intelligence, Mike Rogers, released a statement condemning the alleged plot.

"This is dangerous new territory for Iran," Rogers said. "It is the latest in a series of aggressive actions - from their nuclear program to state sponsorship of terrorism, from complicity in killing our soldiers in Iraq to now plotting hostile acts on U.S. soil. This episode underscores the need for concerted international unity to confront Iran.”

[Updated at 4:30 p.m. ET] The Saudi embassy in the U.S. has released the following statement relating to the alleged plot:

"The Royal Embassy of Saudi Arabia would like to express its appreciation to the responsible agencies of the United States government for preventing a criminal act from taking place. The attempted plot is a despicable violation of international norms, standards and conventions and is not in accord with the principles of humanity."

[Updated at 3:52 p.m. ET] Ali Akbar Javanfekr, a spokesman for Iranian President Mahmoud Ahmadinejad, told CNN he had never heard of those accused in connection with the alleged plot.

“I think the U.S. government is busy fabricating a new scenario and history has shown both the U.S. government and the CIA have a lot of experience in fabricating these scenarios and this is just the latest one,” he said. “I think their goal is to reach the American public. They want to take the public’s mind off the serious domestic problems they’re facing these days and scare them with fabricated problems outside the country.”

Javanfekr says if the Iranian government verifies that these individuals are Iranian citizens, the Iranian government will make every effort to help them.

[Updated at 3:44 p.m. ET] A senior defense official said there has been no change to U.S. military posture in reaction to the terror plot allegedly backed by Iran. The official says American Navy ships in the region have not been re-positioned, and at this point there are no plans to do so.

“The act is already done. One of the people involved is still at large, but the other principal is in custody. So what does changing military posture do?" the official said.

The official says while the Pentagon continues to concentrate on keeping an eye on the Quds Force and Iran’s actions in the region, especially Iraq, Afghanistan and the Persian Gulf, this incident is “much more of a law-enforcement matter.”

The official was not surprised at the level of cooperation apparently given by the Mexican government to foil the terror plot.

“We’ve got a very good working relationship with the Mexican military in a number of ways, especially counter-narcotics. The U.S. Navy and Marine Corps are very involved with their Mexican counterparts, and work together in several ways, including training.”

[Updated at 3:42 p.m. ET] Senior U.S. officials tell CNN that the U.S. will impose further sanctions against Iran in the wake of the alleged foiled terror plot.

[Updated at 3:36 p.m. ET] Former U.S. Ambassador to Saudi Arabia Robert Jordan told CNN that he believes the current ambassador would be a target for Iran because he is a man who can "be counted on to be a collaborative and positive force between the United States and Saudi Arabia."

"It is also an attack on the United States to attack this ambassador," Jordan said, because of the ambassador's relationship with the United States.

Jordan, who said he is a close friend of Saudi Ambassador Adel Al-Jubeir, said he has impeccable credentials and is a consummate diplomat."

"Its very important to understand that the Saudis and the Iranians believe that they are in a mortal battle for supremacy in the Middle East," he told CNN. "The Saudis view Iran as a threat to their hegemony in the Arab world and Iran has been insinuating itself into many of the struggles in the Middle East that is in the contrary to the Saudi national interest."

It is because of the ambassador's position as well as the struggle in the region that Jordan believes he may have been a target.

"I think he is a target [that] there is credibility to this story," he said. "The Saudis have viewed Iran as a threat."

[Updated at 3:15 p.m. ET] Here's how the alleged plot began according to the Justice Department:

In the spring of 2011 through October 2011, Manssor Arbabsiar and his Iran-based co-conspirators, including Gholam Shakuri of the Quds Force, began plotting the murder of the Saudi Ambassador to the United States.

At one point Arbabsiar "allegedly met on a number of occasions in Mexico with a DEA confidential source who has posed as an associate of a violent international drug trafficking cartel," according to the Justice Department.

In May 2011, Arbabsiar met with the confidential source in Mexico and asked about explosives. There he allegedly expressed a specific interest in attacking an embassy in Saudi Arabia. The informant allegedly said he had knowledge about C-4 explosives. It was in a meeting in June that Arbabsiar allegedly explained to the information that he and his associated in Iran had "discussed discussed a number of violent missions" that included "the murder of the Ambassador."

[Updated at 3:06 p.m. ET] A senior Obama official said the administration won't tolerate the targeting of a diplomat on U.S. shores, CNN Chief White House Correspondent Jessica Yellin reported.

The official said the administration believes the alleged plot is a dangerous escalation by Iran and a flagrant violation of international law. The official said the U.S. will work with other international partners to isolate the government, specifically the Islamic Revolutionary Guard and the Quds force.

The official said overall, the impact of the plot, means that the U.S. will continue to isolate Iran.

The official added that the administration has been talking and coordinating with Saudis and remains in close touch with the Saudi government. They have also been in touch with the ambassador at the center of the plot.

[Updated at 2:55 p.m. ET] CNN's Peter Bergen said that based on his knowledge of the region the Saudi ambassador to the United States may have been targeted because he is a key foreign policy adviser to Saudi King Abdullah.

[Updated at 2:41 p.m. ET] National Security Council Spokesman Tommy Vietor released the following statement regarding the plot:

“The President was first briefed on this issue in June and directed his Administration to provide all necessary support to this investigation. The disruption of this plot is a significant achievement by our intelligence and law enforcement agencies, and the President is enormously grateful for their exceptional work in this instance and countless others.”

[Updated at 2:35 p.m. ET] Attorney General Eric Holder, when asked how Iran would be held "accountable" in an alleged plot to assassinate the Saudi ambassador to the United States, said he expected action from the White House, the State Department and Treasury within the next few hours.

A U.S. official expanded more about how the U.S. might hold Iran accountable. The official told CNN's Elise Labott that there are likely to be more sanctions and the U.S. will be taking this up with to the United Nations Security Council and other members of the international community.

[Updated at 2:32 p.m. ET] One of the suspects, Manssor Arbabsiar, allegedly discussed bombing a restaurant in the United States that the Ambassador frequented, according to the complaint.

The U.S. attorney for the Southern District of New York said Tuesday there had been a "discussion of using explosive devices" to carry out the alleged Iranian-linked terror plot against the Saudi ambassador to the United States.

[Updated at 2:27 p.m. ET] "The criminal complaint unsealed today exposes a deadly plot directed by factions of the Iranian government to assassinate a foreign Ambassador on U.S. soil with explosives,” Attorney General Eric Holder said. “Through the diligent and coordinated efforts of our law enforcement and intelligence agencies, we were able to disrupt this plot before anyone was harmed. We will continue to investigate this matter vigorously and bring those who have violated any laws to justice.”

[Updated at 2:25 p.m. ET] The U.S. Attorney for the Southern District of New York called the alleged Iranian-linked terror plot against the Saudi ambassador to the United States "well-funded and pernicious."

"Details of that murder plot are chilling," Preet Bharara said in a news conference Tuesday.

[Updated at 2:22 p.m. ET] The criminal complaint filed Tuesday in the Southern District of New York names Manssor Arbabsiar, a 56-year-old naturalized U.S. citizen holding both Iranian and U.S. passports, and Gholam Shakuri, an Iran-based member of Iran’s Quds Force, which is a special operations unit of the Iranian Islamic Revolutionary Guard Corps (IRGC) that is said to sponsor and promote terrorist activities abroad, according to the Justice Department.

Arbabsiar was arrested on September 29, 2011, at John F. Kennedy International Airport in New York. He will make his initial appearance on Tuesday before in federal court in Manhattan, the Justice Department said. He allegedly confessed to his participation in the murder plot, according to the Justice Department.

Shakuri remains at large.

The men are charged with the following crimes according to the Justice Department: "conspiracy to murder a foreign official; conspiracy to engage in foreign travel and use of interstate and foreign commerce facilities in the commission of murder-for-hire; conspiracy to use a weapon of mass destruction (explosives); and conspiracy to commit an act of international terrorism transcending national boundaries. Arbabsiar is further charged with an additional count of foreign travel and use of interstate and foreign commerce facilities in the commission of murder-for-hire."

[Updated at 2:19 p.m. ET] FBI Director Robert Mueller said the alleged terror plot involving Iran "reads like the pages of a Hollywood script."

"This case illustrates that we live in a world where borders and boundaries are increasingly irrelevant," Mueller said.

[Updated at 2:14 p.m. ET] An alleged plot - involving Iran - to commit terrorism inside the United States "is a fabrication," Ali Akbar Javanfekr, spokesman for Iranian President Mahmoud Ahmadinejad, said Tuesday.

Javanfekr said the Iranian government is awaiting details, but suggested U.S. authorities are attempting to distract American citizens from "domestic problems" by convincing them there is an outside threat.

[Updated at 2:12 p.m. ET] An FBI agent's affidavit obtained by CNN Tuesday accused two men of conspiring to murder Saudi Ambassador Adel Al-Jubeir.

The complaint alleges that Manssor Arbabsiar and Gholam Shakuri began a plot this past spring to kill Al-Jubeir.

Attorney General Eric Holder said in a news conference that the terror plot was a $1.5 million dollar "murder-for-hire" plan.

Officials also said one of the suspects told an informant that killing civilians, including senators, during the attack was "no problem" and "no big deal."

[Posted at 2:00 p.m. ET] The FBI and the DEA have disrupted a plot involving Iran to commit terrorism inside the United States, a senior U.S. official told CNN.

The official said the alleged plan was directed by elements of the Iranian government and involved a plot to kill the Saudi ambassador to the United States.

This story is developing. We'll bring you the latest information as soon as we get it.