Russia's offer to enrich uranium on Iran's behalf is "not sufficient" to resolve the stand-off over Tehran's nuclear programme, Iran says.
Iran's top negotiator said it had merits but was not enough to provide "for Iran's nuclear energy needs".
Iran had earlier reacted warmly to the proposals, raising hopes it might be the key to unlocking the crisis.
While US President Bush praised it as "a good plan", his secretary of state accused Iran of using delaying tactics.
"One cannot say that it is a negative proposal," said Ali Larijani, secretary of Iran's Supreme National Security Council, on his return from talks in China.
"I do believe people ought to be allowed to have civilian nuclear power"
He said it would be further considered, and could be "part of a package", but was not the whole solution.
The Russian proposal involves uranium bound for Iranian power plants being enriched in a joint venture on Russian soil.
Russia would also take back Iranian nuclear waste for reprocessing.
The theory is that if Iran has no enrichment capability, and no nuclear waste, it cannot refine the uranium further to the high quality required to make a nuclear weapon.
Tehran denies US claims that it is seeking to develop nuclear weapons, and says it simply wants to produce nuclear energy.
'Chaff'
Mr Bush said: "I think that is a good plan. The Russians came up with the idea and I support it... because I do believe people ought to be allowed to have civilian nuclear power."
Mr Larijani on Thursday called the Russian proposal "useful".
IRAN'S NUCLEAR STAND-OFF
But US Secretary of State Condoleezza Rice was suspicious of Iran's motives.
The Iranians are "doing nothing but trying to throw up chaff so that they are not referred to the (UN) Security Council and people shouldn't let them get away with it," Ms Rice said.
"The time for talking outside the Security Council is over," she added.
The UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), is meeting in Vienna on 2 February to debate whether to refer Iran to the UN Security Council.
While the US and European countries are thought to be keen to pass the matter to the UN for possible sanctions, Russia and China, which hold vetoes in the Security Council, are looking for other avenues.
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