Top diplomats from six key nations have ended discussions in London on further moves to make Iran comply with demands to end its nuclear programme.
Iran is expanding uranium enrichment, the IAEA says
The talks came after the UN nuclear watchdog confirmed Iran had ignored a deadline to suspend nuclear activities.
The UK Foreign Office called the talks "productive" and said work had begun on a new UN Security Council resolution.
On Sunday Iranian President Mahmoud Ahmadinejad said his country would not go back on its nuclear programme.
And on Monday an Iranian spokesman said demands for it to cease nuclear enrichment as a precondition for talks were "illegal and illogical" and "in contradiction with the Iranian nation's dignity".
Iran denies Western claims it is secretly trying to build nuclear arms, saying its nuclear programme is for peaceful, energy-producing purposes.
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
Monday's meeting of diplomats from the five permanent UN Security Council members - the US, Russia, China, France, and Britain - plus Germany, was called to discuss how to make Iran meet UN demands to halt uranium enrichment.
"We had a productive first discussion of the next steps... We began work on a new Security Council resolution," a Foreign Office statement said, adding that the talks would continue later in the week.
The Security Council imposed sanctions on Iran in December, setting a 60-day deadline for it to stop enriching uranium.
But a report last week by the International Atomic Energy Agency (IAEA) said that Iran was instead expanding the programme.
Enriched uranium is used as fuel for nuclear reactors, but highly enriched uranium can be used to make nuclear bombs.
New tougher sanctions could include travel bans on Iranian officials individuals associated with nuclear and missile programmes.
The BBC's diplomatic correspondent Bridget Kendall says the London meeting was a chance to gauge whether Russia and China could be persuaded to maintain pressure on Iran.
The US was also eager to discuss ways in which bilateral pressure can be applied on Tehran, with issues such as European export credits for business with Iran and arms sales from Russia on the agenda.
US officials point to the recent deal with North Korea on its nuclear programme as proof that diplomatic pressure can work, our correspondent says.
They also note that that deal should be a sign to the Iranians that the US is prepared to negotiate, she adds.
Meanwhile there has been criticism in Iran of Mr Ahmadinejad's comment that nuclear development was "a train on a one-way track with no room for stopping" .
Reformist newspapers said the metaphor was inappropriate because it suggested the programme was out of control.
Correspondents say the coverage is the latest sign of growing criticism of President Ahmadinejad and what some call his confrontational manner with the West.