Iran has begun converting raw uranium into gas which can be used in the process of making nuclear weapons.
Iran says it will continue with or without inspections
Iran's atomic energy chief said 37 tons of uranium mineral were converted into fuel used in nuclear centrifuges.
The move defies calls by the UN's nuclear watchdog for Iran to suspend all enrichment-related activities.
Iran's president said his country will continue developing nuclear technology, even if it leads to international inspections being cut off.
Tests 'to continue'
Reza Aghazadeh, the head of Iran's Atomic Energy Organisation, told reporters in Vienna the conversion process will continue.
"Some of the amount of 37 [metric] tons has been used. The tests have been successful but these tests have to be continued using the rest of the material," he said.
Converted uranium is the fuel used in nuclear centrifuges, machines which enrich uranium.
Enriched uranium can be used for civilian reactors, but also serve as the
explosive core for atomic bombs.
Mr Aghazadeh said his country is willing to take measures to increase confidence in Iran and will continue to co-operate with the International Atomic Energy Agency (IAEA)
At the weekend, the IAEA passed a resolution urging Iran to suspend uranium enrichment and grant access to IAEA inspectors.
The United States has accused Iran of seeking to build nuclear weapons, but Iran has insisted its nuclear programme is solely for peaceful purposes.
Speaking at a military parade on Monday, Iranian President Mohammad Khatami said Iran had made its choice to pursue nuclear energy, even if that meant an end to international supervision.