NEW YORK CITY (AFP) - The United States is set seize control of a midtown Manhattan skyscraper prosecutors claim is secretly owned by Iran, the justice department said, though the ruling is to be appealed.

The seizure and sale of the 36-story building, in the heart of New York City on Fifth Avenue, would be "the largest-ever terrorism-related forfeiture," the statement added.

A federal judge ruled in favour of the government's suit this week, saying the building's owners had violated Iran sanctions and money laundering laws.

Manhattan Federal Prosecutor Preet Bharara said the decision upholds the justice department claims the owner of the building "was (and is) a front for Bank Melli, and thus a front for the Government of Iran."

Mr Bharara said the funds from selling the building would provide "a means of compensating victims of Iranian-sponsored terrorism."

Prosecutors allege the building's owners, the Alavi Foundation and Assa Corporation, transferred rental income and other funds to Iran's state-owned Bank Melli.

Alavi also ran a charitable organisation for Iran and managed the building for the Iranian government, the statement said.

Built in the 1970s by a non-profit operated by the Shah of Iran - and financed with a Bank Melli loan - the building was expropriated by the new Iranian government after the 1979 revolution, prosecutors allege.

They said the Shah's non-profit, the Pahlavi Foundation, was renamed the Mostazafan Foundation of New York and then the Alavi Foundation.

A former president of the Alavi foundation pleaded guilty in 2009 to obstructing justice in destroying evidence related to the case, which was first filed in 2008.

The Alavi foundation said it planned to appeal, saying in a statement on its website it was "disappointed" with the ruling and that "it did not have the opportunity to rebut the Government evidence before a jury." The US Treasury Department has instituted tight sanctions against Iran, blacklisting a number of Iranian companies and organizations and putting very tight controls on the ability of any group or business to transfer funds into Iran.

The restrictions seek to pressure Teheran into giving up what the West says is a program to develop nuclear weapons.