A UN report on Iran's nuclear programme is being forwarded to the UN Security Council for consideration of possible punitive action.
The IAEA's ElBaradei cannot confirm Iran is not seeking weapons
The UN nuclear watchdog took the decision after debating the document - which contains criticism of Iran.
The US says the council will debate Iran's "flagrant threats and phoney negotiations" early next week.
Iran said it had done all it could to reach a peaceful settlement but the US had "hijacked" the diplomatic process.
Iran's ambassador to the IAEA, Ali Asghar Soltanieh, said: "We don't want confrontation but if this is the wish or policy of the Americans, then the Iranian nation will of course defend its integrity and national interests."
The Security Council has the power to impose sanctions, but it is not clear that all its key members would back them.
Russian Foreign Minister Sergei Lavrov said on Wednesday that such measures would be ineffective.
"I don't think sanctions as a means to solve a crisis have ever achieved a goal in the recent history," he told reporters.
Western powers suspect Iran's nuclear programme is aimed at building a weapons capability - Iran says it is entirely aimed at meeting energy needs.
The report being forwarded to the Security Council - which was leaked to the media last week - says the Iranians have begun feeding uranium gas into centrifuges, a first step in a process that can produce fuel for nuclear reactors or bomb material.
However the document could not confirm that Iran was not seeking nuclear weapons.
The debate of the report by the UN watchdog - the International Atomic Energy Agency (IAEA) - in Vienna came amid a war of words between Iran and the US.
Iranian President Mahmoud Ahmadinejad was also defiant: "If we put up a firm resistance, they will be defeated and humiliated by the Iranian nation's will."
The US said Iran had enough nuclear material for 10 atomic bombs and it was time for the Security Council to act.
Mahmoud Ahmadinejad has given no ground in negotiations
"Iran has not met the conditions at the IAEA," Assistant Secretary of State Nicholas Burns told Congress on Wednesday.
"We will therefore start a new phase of diplomacy - action by the UN Security Council" on Monday or Tuesday next week, he said.
However, IAEA head Mohamed ElBaradei, who wrote the report, has appealed to both Western and Iranian leaders to "lower the rhetoric".
"Everybody is looking forward to a political settlement... What we need now at this stage is a cool-headed approach," he said.
If the Security Council does take action, its first step is likely to be to issue a demand that Iran stop nuclear activities by a certain deadline.
It might then issue a further warning before beginning to consider sanctions.
Iran has threatened to press ahead with industrial-scale uranium enrichment if its nuclear work is reported to the UN.