Iran has restarted uranium enrichment work, UN diplomats have said.
President Ahmadinejad says he will resist attempts to curb Iran's plans
They said it had begun feeding uranium gas into centrifuges - a first step in a process that can produce fuel for nuclear reactors or bomb material.
Tehran had warned it would resume enrichment after the UN nuclear watchdog decided to report it to the UN Security Council nine days ago.
Iran has also postponed talks with Russia, due this week, on a proposal to enrich uranium on Russian soil.
International Atomic Energy Agency inspectors are due to visit Iran's Natanz nuclear facility, where Iran's enrichment work is reportedly being carried out, on Tuesday.
According to diplomats in Vienna, home of the IAEA's headquarters, workers at Natanz have begun putting uranium hexafluoride (UF6) gas into a small number of centrifuges used to distil enriched uranium.
Uranium enriched to a high level can be used to make an atomic bomb.
Iran says its research is solely aimed at energy production, but Western powers are concerned that Iran's uranium enrichment programme is part of a plan to acquire nuclear weaponry.
Iranian officials had warned they would restart small-scale uranium enrichment by early March, but they did not specify a date.
The IAEA voted on 4 February to report Tehran to the Security Council over its decision, announced in January, to restart nuclear research.
The nuclear watchdog's board is expected to meet at the beginning of March to consider whether to recommend action on Iran by the council.
On Monday UN Secretary General Kofi Annan said he hoped there would be "no steps taken to escalate the situation".
Speaking after talks with US President George W Bush in the White House, he urged Iran to "indicate that negotiations are not dead".
Iran says it will stop allowing snap UN inspections at nuclear sites
As a means to alleviate the standoff, Russia had proposed that it enrich the uranium on its reactors and then ship the fuel to Iran.
But talks with Russia have been pushed back indefinitely, Iranian presidential spokesman Gholamhossein Elham said.
Russia - which supported the IAEA's decision to refer Iran to the Security Council - said talks could still take place this week.
After the decision, Iran announced it would end its voluntary freeze on full-scale uranium enrichment and would stop allowing snap UN inspections of its nuclear sites.
The move, which could lead to sanctions, has been roundly condemned in Tehran, and Iranian President Mahmoud Ahmadinejad is now threatening to quit the nuclear Non-Proliferation Treaty (NPT).
The NPT, which has 187 signatories, was created to prevent new nuclear states emerging, to promote co-operation in the peaceful use of nuclear energy and to work towards nuclear disarmament.
Non-nuclear signatories agree not to seek to develop or acquire such weapons. In return, they are given an undertaking that they will be helped to develop nuclear energy for peaceful purposes.
It is believed to be the first time Iran has threatened to pull out of the treaty.