Iran has reportedly admitted to the United Nations nuclear watchdog that it has produced plutonium - a material that could be used in nuclear weapons.
The IAEA sees no sign of a nuclear weapons programme so far
The admission comes in a report by the International Atomic Energy Agency on Iran's nuclear programme which the agency will consider next week.
The leaked IAEA report says Iran failed repeatedly to declare the extent of its programme but is now co-operating.
The US has demanded proof from Tehran that it is not developing weapons.
The report reveals that Iran has manufactured small amounts of both plutonium and enriched uranium - another material that can be used to make a nuclear bomb.
Iran says it is suspending its uranium enrichment with effect from Tuesday and has also announced that it will allow tougher UN inspections of its nuclear facilities.
The United States has accused Iran of trying to build a bomb, but the Iranian authorities say their nuclear programme is designed purely to meet the country's energy needs.
Details of the IAEA report emerged as Iran responded angrily to the latest US criticisms of the regime in Tehran.
Iranian state radio described remarks by US Secretary of State Colin Powell as "extremely offensive".
Mr Powell had said the Iranian people wanted their freedom back and referred to Iranian clerics as people who had "dragged the sacred garments of Islam into the political gutter".
Iranian radio said: "Colin Powell has spoken against Iran on many occasions, but this is the first time that he has worn the cloak of an Islamologist to criticise the Islamic Republic of Iran."
The IAEA report, widely quoted by news agencies, says there is no sign that Tehran has secretly been developing weapons.
"To date there is no evidence that [Iran's] previously undeclared nuclear material and activities... were related to a nuclear weapons programme," the agency said.
"However," it added, "given Iran's past pattern of concealment, it will take some time before the agency is able to conclude that Iran's nuclear programme is exclusively for peaceful purposes."
"Iran's policy of concealment continued until last month, with co-operation being limited and reactive and information being slow in coming, changing and contradictory," it said.
In September, the IAEA Board of Governors gave Iran an 31 October deadline to give details of its nuclear programme.
To meet the deadline, Iran made a number of admissions to hidden activities, according to the report.
The Vienna-based IAEA is to meet later this month to decide whether to declare Iran in violation of the Nuclear Non-Proliferation Treaty.
On Monday, Tehran said it was suspending its uranium enrichment programme and giving a letter to the IAEA agreeing to sign a protocol allowing for a more intrusive inspections of its facilities.
The IAEA welcomed the suspension as a goodwill gesture.