Iran has begun preparations for the resumption of uranium processing at a nuclear plant, a top official has said.
Iran insists it wants nuclear power, not weapons
Iranian experts and UN inspectors are setting up surveillance equipment before the uranium conversion process is initiated, the official said.
The threat of resumption sparked strong objections from the UN, the EU and the US, which repeated its threat to refer Tehran to the UN Security Council.
A BBC correspondent says Iran seems to have lost patience with negotiations.
Frances Harrison, in the Iranian capital, says Tehran has long engaged in brinkmanship over the nuclear issue, but this time appears to be serious about resuming its nuclear programme.
It ceased uranium processing at its Isfahan plant in November 2004.
Iran insists it wants only to use its facilities to produce power, but the US suspects it of running a secret nuclear weapons programme.
Uranium ore, or "yellow cake", can be converted into gas and used as fuel for nuclear power plants, or further enriched to become weapons-grade material.
On Monday, officials in Tehran said they had delivered a letter to the International Atomic Energy Agency (IAEA) explaining plans to restart uranium conversion that day.
IAEA head Mohamed ElBaradei responded, urging Iran to reconsider, and to continue sensitive negotiations with EU members Britain, France and Germany.
The IAEA said it needed until next week to install additional surveillance equipment before the seals could be removed.
A diplomat close to the IAEA told AFP news agency that the body was "looking for formulas to delay so that cooler heads might prevail".
The EU is due to propose a package of incentives to Iran on trade, security and technology if it permanently ceases enrichment activity.
Our correspondent says Tehran is not prepared to make such guarantees.
Late on Monday, Iran's Supreme National Security Council spokesman Ali Agha Mohammadi said the installation of surveillance equipment was under way, and conversion would follow.
"This process will take time, but in our view the uranium conversion facility has been restarted," he said.
After Iran announced its plans, European officials urged it not to take unilateral action that could endanger hopes for a negotiated solution to the dispute.
A spokesman for the German government said: "We are still ready to negotiate with Iran on the basis of our previous agreements. But now it is up to Iran not to miscalculate."
The US repeated the implicit threat of UN sanctions against the Iranians.
"If they're not going to abide by their agreement and obligations, then we would have to look to the Security Council," White House spokesman Scott McClellan said.