"There are signs that political and economic pressure is having an impact in Tehran," said John Chipman, the institute's chief executive, speaking at the launch of its annual publication, "The Military Balance."
Although Chipman said Iran could be as little as two years away from a bomb, other authorities say it could take Tehran significantly longer to reach that point.
Both John Negroponte, the head of national intelligence for the United States, and Mohamed ElBaradei, director general of the International Atomic Energy Agency, have said Iran is perhaps four years from the capacity to produce a nuclear weapon.
While Iran could conceivably build a bomb in two years, a three-year time frame was more likely, said Mark Fitzpatrick, a nonproliferation expert at the institute. He said estimates floated by U.S. intelligence were conservative — a likely result of its chastening experience in Iraq.
"The CIA is being extra cautious these days," he said.
Chipman said Wednesday that Iran was on track to complete its goal of producing 3,000 centrifuges for producing highly-enriched uranium by the end of March or shortly thereafter. Many centrifuges had been obtained from the black market, he said.
Iran ultimately plans to expand its program to 54,000 centrifuges, which spin uranium hexaflouride gas into enriched uranium, a metal.
Iran says it aims to produce nuclear fuel to generate electricity. But if Iran chose, it could use the massive array of centrifuges to make enough weapons-grade material for dozens of nuclear warheads a year.
Diplomats briefed on the IAEA's findings said this month that the Iranians recently finished pre-assembly work at its enrichment facility at Natanz, in central Iran, which has been built underground as protection against attack.
In enrichment plants, centrifuges are linked by pipes in what are called cascades, which cycle the gas as it is processed. For now, the only known assembled centrifuge cascades in Iran are above ground at Natanz, consisting of two linked chains of 164 machines each and two smaller setups.
The two larger cascades have been running only sporadically to produce small quantities of non-weapons grade enriched uranium, while the smaller assemblies have been underground "dry testing" since November, IAEA inspectors have reported.
The United Nations on Dec. 23 imposed sanctions on Iran for pursuing enrichment efforts, and gave it 60 days to suspend the program.
A diplomat knowledgeable about Iran's enrichment program said last week that Tehran may not be technologically advanced enough to put together thousands of centrifuges in series — work that would take months even for more developed countries.
Chipman on Wednesday agreed. "Getting the centrifuge cascades to function properly is then another task of an entirely different order of magnitude" from installing the centrifuges, he said, adding that this process could take at least a year.
Once Iran's planned 3,000-centrifuge cascade was operational, the institute predicted it would take another nine to 11 months to produce about 55 pounds of highly enriched uranium, enough for a single weapon, he said.
Chipman also said it was possible that growing disquiet within Iran over Ahmadinejad's leadership — and the economic troubles linked to possible sanctions — may open a debate in the country on the wisdom of pursuing the nuclear program.
"Whether the internal debate will lead to a suspension in the enrichment program that would provide the basis for resumed negotiations remains to be seen," he said.
The institute is widely considered the most important security think tank outside the United States.