U.S. Secretary of State Condoleezza Rice said there was a "very strong case" for moving forward with a third round of sanctions against Tehran, while Iran said the report's findings confirmed that its nuclear program is a peaceful one.
"There is very good reason after this report to proceed to the third Security Council resolution," Rice said Friday, adding that the report "demonstrates that whatever the Iranians may be doing to try to clean up some elements of the past, it is inadequate."
The 11-page report obtained by The Associated Press said Iran "has not suspended its enrichment-related activities," despite two sets of U.N. Security Council sanctions over fears the program might be used to make weapons-grade uranium instead of the nuclear fuel Iran says it is interested in.
Instead, said the report, Iran "started the development of new-generation centrifuges" - an expansion of enrichment - and continued working on heavy water nuclear facilities. When finished, Iran could cull them for plutonium, a possible fissile payload in nuclear warheads.
At the same time, the International Atomic Energy Agency report said that Tehran has cooperated in other areas of an IAEA probe, leading the agency to put to rest for now suspicions that several past experiments and activities were linked to a weapons program.
Specifically, the report suggested the agency was satisfied with answers provided by Iran on the origin of traces of enriched uranium in a military facility; on experiments with polonium, which can also be used in a weapons program; and on purchases on the nuclear black market.
It said that in those areas information given by Tehran is either "consistent with its findings (or) ... not inconsistent with its findings," suggesting it was content for now with explanations that these activities were not weapons-related.
Iran's U.N. Ambassador Mohammad Khazee said the report "clearly attests to the exclusively peaceful nature of the nuclear program of the Islamic Republic of Iran, both in the past and at present."
The report "also serves to strongly and unambiguously support my country's long-standing position that the allegations raised by few powers against the peaceful nuclear program of the Islamic Republic of Iran have been entirely groundless," Khazee said in written response to the AP.
But the American U.N. ambassador said Friday that report should pave the way for passage next week of a new U.N. Security Council resolution tightening sanctions on Tehran.
"They're increasing their capabilities," U.S. Ambassador Zalmay Khalilzad said. "Not only have the number of centrifuges increased, but they're working on a second-generation, if you like, a more capable centrifuge.
"Things are getting worse in terms of the enrichment part."
Britain and France introduced a council resolution on Thursday - with support from the United States, Russia, China and Germany - to expand and toughen travel bans and the freezing of assets for more Iranian officials linked to the nuclear effort.
A declassified U.S. intelligence report last December judged that the Iranians had put a nuclear weapons program on hold in 2003. But the U.S., Israel and others contend Iran's continued advances in the crucial centrifuge work will eventually give it a capability to quickly build a bomb.
Much of the information purportedly linking Iran to attempts to make nuclear arms came from the United States, with allies providing lesser amounts and the IAEA passing on selected material to Tehran, after approval by the nations that gave the agency the information.
IAEA chief Mohamed ElBaradei, who drew up the report, said his team had "made quite good progress in clarifying the outstanding issues that had to do with Iran's past nuclear activities, with the exception of one issue, and that is the alleged weaponization studies that supposedly Iran has conducted in the past."
Ahead of the confidential report's release to the 35-nation IAEA board and the U.N. Security Council, U.S. officials had repeatedly insisted that the IAEA probe would be incomplete unless Iran acknowledged trying to make nuclear arms in the past. That stance is shared by Canada, Japan, Australia and U.S. allies in Europe.
A senior IAEA official, who spoke on condition of anonymity because the report was confidential, said that if the material provided by the U.S. and other agency members on the alleged activities was genuine, most of Iran's work was "most likely for nuclear weapons."
But he said the agency was not reaching any conclusion until the Iranians went beyond rejection of the purported evidence and concretely addressed the issues it raised.
When confronted with some of the documentation from the U.S. and other on its alleged weapons experiments, Tehran "stated that the allegations were baseless and that the information ... was fabricated," the report said.
Iran explained some of its activities linked by the Americans to a weapons program as work on "air bags and for the design of safety belts," according to the report.
The report will be the focus of discussions at an IAEA board report starting March 3. At that meeting, the U.S. and its allies are weighing whether to ask the board to approve a resolution declaring that the agency was unable to shed light on Iran's suspected nuclear weapons program, according to diplomats.