Iran has installed about 1,000 advanced uranium enrichment centrifuges and is set to test them, a UN nuclear report showed, a development likely to worry Western powers hoping for a change of course under the country's new president.
The International Atomic Energy Agency's quarterly report - the first since relative moderate Hassan Rouhani won Iran's June presidential election - also said the Islamic state had started making fuel assemblies for a reactor which the West fears could yield nuclear bomb material. Iran denies any such aim.
On the other hand, Iran's most sensitive nuclear stockpile has grown little - remaining below its arch-enemy Israel's stated "red line" that could provoke military action - since the previous IAEA report in May.
Iran's possible restraint could buy time for more negotiations with six world powers.
The report showed Iran continuing to press ahead with its disputed nuclear programme at a time when the outside world is waiting to see if Rouhani will increase transparency and reduce confrontation in Iran's foreign policy, as he has pledged.
However, envoys accredited to the IAEA had cautioned against reading too much into the latest inspectors' report as it mainly covered developments before Rouhani took office on August 3, replacing the conservative hardliner Mahmoud Ahmadinejad.
Iran says its nuclear energy programme is for electricity generation and medical uses only.
It has rejected Western accusations that it is trying to develop the capability to produce nuclear bombs, despite having hidden activities from UN non-proliferation inspectors in the past.
The IAEA report said Iran had fully installed a total of 1,008 new-generation centrifuges at the underground Natanz complex and was planning to test their performance ahead of feeding them with uranium material.
Iran, it said, had further completed preparatory work for installing about 2,000 other advanced centrifuges, which experts say could boost the rate of refinement by two- or three-fold.
The report also said Iran had begun making nuclear fuel for its planned Arak heavy-water research reactor but had postponed its commissioning beyond the start of next year.
That delay could come as a relief to Western leaders as they are concerned the Arak complex could offer Iran a second path to weapons-grade fissile material by churning out plutonium.
Iran denies any such intention, saying the Arak facility is to produce isotopes for agriculture and medicine.