The drill has been going on for several days near the Strait of Hormuz, the route for 20 percent of the world's oil exports.
Tehran said the missile fired in Monday's tests could destroy a warship. Called Ghader, or Capable in Farsi, the missile was described as an upgraded version of a missile that has been in service before. The official IRNA news agency said the missile "successfully hit its intended target" during the exercise.
On Sunday, Iran's navy test-fired a surface-to-air missile.
The tests come just after the announcement that Iran produced its first nuclear rod, a development that brings the country one step closer to nuclear weapons capability.
Iran's 10-day navy drill, which ends Tuesday, was Tehran's latest show of strength in the face of mounting international criticism over its nuclear program.
The Associated Press contributed to this report.