Iran has set up more than 300 centrifuges at two uranium enrichment sites at its underground Natanz complex, Western diplomats have said.
Natanz is expected to have some 3,000 centrifuges at first
If confirmed, the centrifuges would be the first of 3,000 that Iran says it is planning to install at the site in the coming months.
The centrifuges could pave the way for work to create enough fissile material for a nuclear warhead.
Iran has repeatedly denied that it plans to develop nuclear weapons.
Two "cascades" of 164 centrifuges each have been installed at Natanz, the diplomats said on condition of anonymity.
Centrifuges spin uranium gas to enrich it to low levels for fuel and much higher levels for nuclear weapons.
Iran has said it eventually plans to install 54,000 centrifuges at Natanz.
Former UN nuclear inspector David Albright, whose Washington-based Institute for Science and International Security tracks Iran's nuclear activities, said Iran should be able to reach its goal of 3,000 centrifuges by the end of the year.
The International Institute for Strategic Studies in London (IISS) has said that once Iran has 3,000 centrifuges operating smoothly, it could produce enough highly enriched uranium for one bomb in nine to 11 months.
On Saturday, a group of ambassadors from non-aligned countries was taken on a tour of a nuclear facility near the city of Isfahan on what was billed as a transparency visit.
It was the first such trip since the UN imposed limited sanctions on Iran in December for refusing to suspend its uranium enrichment programme.