UN nuclear inspectors in Iran have found undeclared components of an advanced uranium-enrichment centrifuge at an air force base, diplomats say.
The US suspects Iran is trying to develop nuclear weapons
Correspondents say the alleged find may be the first known link between Iran's nuclear programme and its military.
The UN's nuclear watchdog, the IAEA, has declined to comment on the report.
Tehran denied the report strongly, saying in a statement to the Reuters news agency Iran "has not had nor does it have military nuclear activities".
The diplomats said the parts found were compatible with the P-2 centrifuge - a more advanced type than the model Iran has acknowledged using.
The daily USA Today reported that the machinery was found at the Doshan-Tappeh air base in Tehran.
But Foreign Ministry spokesman Hamid Reza Asefi said Iran had no P-2 centrifuges at military locations.
The IAEA is currently examining Iran's nuclear activities for signs that it might be developing weapons.
Iran insists its nuclear programme is only for civilian purposes and says it made a full declaration to the IAEA in October.
On Tuesday, Iran's Foreign Minister Kamal Kharrazi said Tehran had only been studying designs of a P-2 centrifuge and that the IAEA had been informed about its research.
"The P-2 centrifuge device is a research programme... We try to utilise any new models in the industry," he was quoted as saying.
He also said Iran could meet its own nuclear fuel demands and could supply the fuel to other countries.
Gas centrifuges - which can be used to make nuclear warheads - spin at supersonic speeds to separate fissile uranium-235 from the non-fissile uranium isotopes.
The diplomats - who were not identified - said preliminary investigations by IAEA inspectors indicated the Iranian components matched drawings of equipment found in Libya and supplied by the clandestine Pakistani network headed by scientist Abdul Qadeer Khan.
The P-2 centrifuge is a Pakistani version of the advanced Western G-2 design and can produce material for use in reactors or bombs.
Iran agreed late last year to a tough inspections regime overseen by the IAEA.
Under the Nuclear Non-Proliferation Treaty, countries are allowed to enrich uranium, but must notify the authority they are doing so.
Iran promised the IAEA in October that it would suspend its uranium enrichment programme.
US President George W Bush has said the world needs tighter restrictions to prevent the spread of nuclear know-how.
Washington said it would give Iran more time fully to disclose its nuclear activities before deciding whether to refer the issue to the United Nations Security Council.