Iran is facing growing calls from the international community to halt its nuclear activities after announcing it has successfully enriched uranium.
Mahmoud Ahmadinejad says Iran's intentions are peaceful
The US secretary of state said it was time for "strong steps" by the UN, and her Russian counterpart said Iran was going "in the wrong direction".
Iranian President Mahmoud Ahmadinejad has stressed that his country's nuclear intentions are peaceful.
The UN's nuclear watchdog chief is flying to Tehran to discuss the crisis.
Mohamed ElBaradei, who heads the International Atomic Energy Agency (IAEA), is to report back to the UN Security Council at the end of this month on whether Tehran is complying with its demand to stop all enrichment activity by 28 April or face isolation.
Iran could be in a position to produce enough fissile nuclear material to make a nuclear bomb within 3-5 years, according to the London-based International Institute of Strategic Studies.
Iran's deputy nuclear chief Mohammad Saeedi has said Iran intends to move toward large-scale uranium enrichment involving 54,000 centrifuges, signalling the country's resolve to expand its nuclear programme.
His comments come a day after Iran announced it had succeeded in enriching uranium on a small scale for the first time, using 164 centrifuges, at a facility in Natanz.
UN Secretary General Kofi Annan said on Wednesday he hoped that Mr ElBaradei would be able to persuade Iran to resume negotiations.
"They have pursued their research but I hope they will be able to come back to the table and work with the international community to find a negotiated solution.
"And I appeal to every one to work more actively in search of a diplomatic solution and to cool down the rhetoric," Mr Annan said.
Amid a growing international outcry, US Secretary of State Condoleezza Rice said the Security Council would need to take "strong steps" to maintain "the credibility of the international community on this issue".
UK Foreign Secretary Jack Straw said he was "seriously concerned", adding Iran's latest move "further undermines international confidence in the regime and is deeply unhelpful".
Germany and France also voiced their worries, and China said it was "concerned about the event and the way things are developing."
However, China's ambassador to the UN Wang Guangya urged all parties to "exercise restraint, act constructively and not to take action that might further aggravate the situation".
Although Russian Foreign Minister Sergey Lavrov said the move was "in the wrong direction", he warned against dramatising the situation and reiterated Moscow's firm opposition to any military action against Iran.
President Ahmadinejad, announcing Iran's breakthrough in a televised speech on Tuesday, said it was a "very historic moment" and "the start of the progress of the country".
He urged the West to respect what he called Iran's right to peaceful atomic technology.
'A heavy blow'
The US and Europe are pressing for sanctions against Iran, a step Council members Russia and China have so far opposed.
The BBC's Steve Rosenberg in Moscow says Tehran's announcement undermined Russia's attempts to promote a compromise deal which would allow Tehran to enrich uranium, but only on Russian soil and under strict Russian supervision.
As frustrated as Russia is, Moscow still seems reluctant to increase the pressure too much on the Islamic republic, our correspondent says.
Moscow knows that if diplomacy fails, and the UN Security Council imposes sanctions, then Russia's extensive economic interests in Iran could be dealt a heavy blow, he adds.
Iran said it had operated 164 centrifuges, creating the cascade required to achieve "industrial output" of enriched uranium.
But the process would only create the low-level enrichment needed for nuclear fuel.
Iran would need thousands of centrifuges to create the highly enriched uranium needed for nuclear weapons.
Experts say Iran is some way off from having a nuclear bomb, with predictions ranging from a year to more than a decade.