Permanent members of the UN Security Council and Germany will meet in London on Monday to discuss further sanctions against Iran, a US official has said.
Iranians have protested outside Western embassies in Tehran
The announcement came after the UN's nuclear agency confirmed that Iran had ignored a deadline to suspend its nuclear activities.
The report said Iran was expanding its enrichment programme, defying a UN resolution of December 2006.
Iran says the UN call for it to stop uranium enrichment is unacceptable.
US Undersecretary of State Nicholas Burns said he would hold talks in the UK on Monday with representatives from the five permanent UN Security Council members, plus Germany, on drafting a second resolution sanctioning Iran.
Iran was "effectively thumbing its nose at the international community", he said.
But Mohammad Saeedi, deputy head of Iran's nuclear agency, said the UN demands had no legal basis.
"Iran considers that a suspension of uranium would be contrary to its rights, to the Non-Proliferation Treaty and to international rules," he said.
"Given that, Tehran cannot accept Security Council Resolution 1737 demanding a suspension of uranium enrichment."
Iran denies Western claims it is secretly trying to build nuclear arms, saying its nuclear programme is for purely peaceful, energy-producing purposes.
While enriched uranium is used as fuel for nuclear reactors, highly enriched uranium can also be used to make nuclear bombs.
The report, written by International Atomic Energy Agency (IAEA) head Mohamed ElBaradei, said Iran had not only failed to stop enrichment but was expanding the scale of its enrichment programme.
POSSIBLE NEXT STEPS
New UN resolution on tougher economic sanctions, tabled by US or European allies
US pressure on Europeans to step up bilateral sanctions
New initiative to get Iran back to talks
The six-page document said there had been little progress in clearing up outstanding questions about Iran's past nuclear activities.
It said Iran had expanded from research-scale to industrial-scale production of enriched uranium.
Two cascades of 164 centrifuges each had been installed at the enrichment facility in Natanz, with two more close to completion, it said.
A total of 3,000 centrifuges are expected to be installed in the coming months.
Iran was also building a heavy water reactor and heavy water production plant in defiance of the UN Security Council, the report said.
Tehran had agreed to interim IAEA verification procedures but not to remote monitoring at the plant, it added.
There would be a breach of non-proliferation safeguard rules once more than 500 centrifuges were installed.