There is still a risk of Iran acquiring a nuclear weapon, but the UK remains focused on a diplomatic solution, says Foreign Secretary David Miliband.
Mr Miliband said Britain wanted a diplomatic solution
He was speaking after a US assessment said Iran halted its nuclear weapons development programme four years ago in response to international pressure.
But the report, a composite of findings from intelligence agencies, said Iran could develop a nuclear weapon by 2015.
Iran says it wants enriched uranium to fuel civil power stations, not weapons.
The National Intelligence Estimate published on Monday says it is now believed that Iran stopped its weapons programme in 2003 in response to international pressure.
It suggested Tehran was not likely to have enough highly enriched uranium to build a bomb until 2010 -2015.
Iranian foreign minister Manouchehr Mottaki has welcomed the US decision to "correct" its claim that Iran was actively building weapons.
But asked whether he agreed that Iran had stopped its nuclear programme, Mr Miliband told the BBC he did not want to get into a "point by point" dispute about a report that was only published 24 hours ago.
'Nuclear arms race'
In a statement, Mr Miliband said of the report: "It confirms that there remains a serious enrichment problem, enrichment of uranium being a potential source of nuclear weapons. Secondly, it shows that diplomacy can work."
Mr Miliband told BBC Radio 4's World at One: "We are happy to work with them on a civilian nuclear power programme, enrichment is part of that."
But he said people were "rightly sceptical" of Iran's claims that its programme is for civilian nuclear power when there were no nuclear power plants for the enriched uranium to go to, and when Iran had misled the international community in the past.
Earlier Prime Minister Gordon Brown's spokesman said the report confirmed "we were right to be worried about Iran seeking to develop nuclear weapons.... It also shows the intent is there and the risk of Iran acquiring a nuclear weapon remains a very serious issue."
'Drumbeat to war'
And shadow foreign secretary William Hague told the BBC the problem had not "gone away" adding: "It would be a great mistake for the international community to say 'Oh, thank heavens for that, we don't have to worry about this at all'."
At a White House news conference US President George Bush said the report was not a signal for everyone to "relax and quit".
"Our policy remains the same. I see a danger and many in the world see the same danger," he said.
But Lib Dems foreign affairs spokesman Michael Moore criticised Mr Bush's "stubborn, hawkish response" adding: "European leaders must ignore the neo-con drumbeat to war."
The declassified summary of the report, which draws together information from the 16 US intelligence agencies, says with "high confidence" that Iran stopped its nuclear weapons programme in 2003 "in response to international pressure".
The assessment says with "moderate confidence" that the programme has not restarted.