The UN's nuclear watchdog says it cannot provide "credible assurances" that Iran is not building a bomb despite new data supplied by Tehran.
Tehran says its purposes are entirely civilian
The International Atomic Energy Agency said Iran had granted new site access but remained evasive on key issues.
Iran was still enriching uranium in defiance of UN resolutions and was testing advanced centrifuges to speed up the process, the report said.
Iran said the report was "positive" and would hamper calls for new sanctions.
"This report showed that our activities are peaceful," Reuters news agency quoted top nuclear negotiator Saeed Jalili as saying in Tehran.
But the US said it was "disappointed" with Iran's failure to comply with its UN and IAEA obligations.
US Secretary of State Condoleezza Rice said there remained "a very strong case" for pressing ahead to a third UN Security Council resolution against Iran over its nuclear programme.
Iran's leader has hailed the country's nuclear progress
"This report demonstrates that whatever the Iranians may be doing to try to clean up some elements of the past, it is inadequate given their current activities," she said.
"What we all have to worry about... is the future in which Iran could start to perfect the technologies that could lead to a nuclear weapon."
BBC diplomatic correspondent Jonathan Marcus says the IAEA findings are mixed at best and not the clean bill of health Iran had sought.
He says the report sets the scene for renewed efforts by the US and its key European allies to try to bring in the third round of economic sanctions at the UN.
Senior diplomats from the US, Britain, France, Germany, China and Russia will meet in Washington on Monday to discuss next steps regarding Iran's nuclear programme.
Last month, the five permanent members of the Security Council agreed on the text of a new draft resolution against Tehran.
Tehran refuses to stop enriching uranium, claiming its nuclear programme is purely for power generation.
The IAEA forged a deal last August with Iran for a timetable to resolve questions over aspects of its past nuclear activities.
But Friday's report said Tehran had evaded a proper response to claims it had made covert efforts to "weaponise" nuclear material, as well as conducting high explosives testing and carrying out design work on a missile warhead.
"This is a matter of serious concern and critical to an assessment of a possible military dimension to Iran's nuclear programme," the report said.
Without this data, the agency would not be able to provide "credible assurances about the absence of undeclared nuclear material and activities in Iran," the report added.
In Vienna, Austria, IAEA Director-General Mohamed ElBaradei told reporters Iran had shown new transparency but this was still not "sufficient".
The nuclear watchdog reported in August 2007 that Iran had not suspended enrichment and was continuing to construct a heavy water plant, which could produce plutonium - a possible material for a nuclear bomb.
In December last year a US intelligence assessment claimed Iran had conducted a nuclear weapons programme until 2003 but that it had probably not restarted it.