Iran has announced immediate plans to step up its nuclear programme, which Western nations fear could be used to make a bomb.
The International Atomic Energy Agency was informed by letter on Monday.
Iran's nuclear chief Ali Akbar Salehi said Iran will start enriching uranium to 20%, effective immediately. Ten new uranium enrichment plants will be built in the coming year.
He said the enrichment will take place at Natanz, Iran's main uranium enrichment plant.
The BBC reports the move heightens fears that Iran is moving closer to weapons-grade uranium.
French Foreign Minister Bernard Kouchner described the move as "real blackmail."
The United States said there was no choice now but to push for further sanctions.
Russia again called on Iran to abide by its earlier agreements to send uranium abroad for enrichment.
The UN Security Council has already imposed three rounds of sanctions against Iran in an effort to make it stop all uranium enrichment activities and heavy-water projects.
Iran celebrates the 31st anniversary of the Islamic Revolution on Thursday.