Foreign Secretary Shivshankar Menon held a four-hour meeting with US Under Secretary of State Nicholas Burns to iron out remaining differences on the '123 Agreement' which has already witnessed "90 per cent progress".

Discussions between the two top diplomats continued till late in the evening, with sources saying that progress had been made but differences remained. Further talks will be held on Friday to iron these out.

"We are working very hard at it (the agreement)," Burns told PTI.

India has been insisting on having the right to reprocess spent nuclear fuel and is not ready to accept any legally binding clause in the agreement that could cap its strategic nuclear programme.

Before going in for talks, Burns said the two countries were "nearly there" but "some hard work has to be done" to conclude the agreement. He, however, expressed confidence that the pact will be concluded, saying there were a "lot of reasons to feel optimistic".

The talks assume significance as the two sides are aiming at concluding the negotiations on the agreement ahead of the meeting between Prime Minister Manmohan Singh and US President George W Bush in Germany on the sidelines of G-8 Summit on June 7.

Emphasising that the agreement was in the interest of both the countries, Burns said the "most ambitious proposal" in 30 years will allow correction of "major problems" in the bilateral relations.

It will end India's nuclear isolation, he noted. Ahead of his visit here, Burns said last week that 90 per cent of the work has been completed and he would be making the "final effort".