Iran is producing a gas that can be used to make nuclear arms, days before its promise to freeze such activities takes effect, Western diplomats say.
Iran denies claims that it wants to build nuclear weapons
Tehran has agreed to suspend uranium enrichment from Monday in a deal reached with the European Union.
But the diplomats say it recently started producing uranium hexafluoride, which can be enriched into weapons-grade uranium.
A senior Iranian envoy has denounced the accusation as a "sheer lie".
Iran agreed last Sunday that it would freeze its enrichment programme after talks with the EU.
The agreement is designed to ease concerns that Iran's nuclear programme aims to produce atomic weapons - a charge Tehran denies.
The diplomats include a non-US member of the governing board of the International Atomic Energy Authority (IAEA), the UN nuclear watchdog.
They said Iran was exploiting the window until Monday to produce the uranium hexafluoride, at a processing facility in Isfahan.
"I strongly reject it," Iranian spokesman Hossein Mousavian told Reuters. He said Iran was preparing to suspend production.
These latest reports are likely to disappoint the Europeans and raise doubts about Tehran's goodwill, says the BBC's Bethany Bell in Vienna, where the International Atomic Energy Authority is based.
The US has frequently accused Tehran of using its nuclear energy policy as a front for developing atomic weapons.
Washington has been at the forefront of moves to refer the country to the UN Security Council - which has the power to impose sanctions - when the IAEA meets on 25 November.
The US said on Friday it was "seriously concerned" by the claims.
"These allegations only heighten our concerns that Iran
continues to pursue nuclear activities and does not honour its
commitments," State Department spokesman Adam Ereli
Iran has huge reserves of raw uranium and has announced
plans to extract more than 40 tons a year.
Iranian officials say the Isfahan plant can convert more
than 300 tons of uranium ore a year.