Iran plans to start building a heavy water reactor which could produce weapons-grade plutonium, diplomats say.
The US wants Iran to stop building a nuclear plant at Bushehr
Tehran told the head of the UN's International Atomic Energy Agency (IAEA) it would start construction in June, the sources at the IAEA said.
Although Iran insists the plant is purely for research, the diplomats say it is a worrying development.
One said the plant could produce enough plutonium to make a nuclear weapon each year.
Mohamed ElBaradei was told of Iran's plans on Tuesday, during a visit to the Iranian capital, the sources said.
The plant would be built in Arak, 200km (120
miles) southwest of Tehran.
Mr ElBaradei has been conducting an assessment of Iran's nuclear ambitions, after the discovery last year that it had not disclosed large-scale efforts to enrich uranium, which can be used in nuclear warheads.
The latest report on the reactor "sends a bad signal at a time all eyes are on Iran," an unnamed diplomat told the AP news agency.
Iran says it needs the reactor to produce radioisotopes for medical research.
But spent fuel rods from the heavy water nuclear reactor could be reprocessed to produce plutonium.
Iran has been trying to counter international concern that it is attempting to build a nuclear arsenal, promising to tell the IAEA everything about its nuclear activities.
The IAEA is due to meet in June to discuss progress. If it decides there are reasons to censure Iran, the case may be passed to the United Nations Security Council.