Iran's President Mahmoud Ahmadinejad has inaugurated a new phase of a heavy water reactor project despite Western fears about its nuclear programme.
The Iranian president said his message was one of peace
He said Iran posed no threat to other states, not even its "enemy" Israel.
Heavy water reactors produce plutonium which can be an alternative route to a nuclear device, the other being highly enriched uranium.
Observers say Iran's move aims to send a signal of defiance days ahead of a UN deadline to halt uranium enrichment.
The US says Tehran is trying to build a nuclear weapon, while Iran says it is building a reactor to supply the country with nuclear power.
The Iranian president toured the site at Arak, 190km (120 miles) south-west of Tehran.
After inaugurating the heavy water plant, he again said Iran would never abandon its nuclear programme, but that nuclear weapons were not its goal.
"Basically, there is no talk of nuclear weapons," he said. "There is no discussion of nuclear weapons. We are not a threat to anybody, even the Zionist regime which is a definite enemy of the people of the region."
Located at Khondab, some 190km (120 miles) southwest of Tehran
New plant now produces up to 16t of heavy water per year - Iran wants to produce up to 80t a year
Western diplomats say producing heavy water itself does not violate non-proliferation treaties
Water to be used to cool a new research reactor currently under construction
Reactor will produce plutonium by-product that could be used to make atomic warheads
Reactor expected to be completed by 2009
Source: News agencies and Iranian government
The ceremony comes amid mounting international pressure for Iran to suspend its nuclear programme.
Earlier this week, Iran had offered "serious talks" in response to a package of incentives offered if, by 31 August, it halted uranium enrichment - another possible route to nuclear weapons.
However, the US said suspension of research was required first, echoing French comments. China and Russia said earlier that talks were the only way forward.
Iran could face sanctions if it does not suspend its nuclear programme.
'Bone of contention'
BBC regional analyst Pam O'Toole says the heavy water reactor project at Arak has long been a bone of contention between Iran and some Western governments.
Arak was one of two Iranian nuclear facilities whose existence was revealed by an exiled Iranian opposition group four years ago. At that stage Iran had failed to declare its existence to the UN's nuclear watchdog, the IAEA.
The IAEA later called on Iran to reconsider construction of its heavy water reactor project.