The supreme atomic energy council said it had "authorized the Iranian atomic energy organization to take measures and start the contracts," for the second phase of the plant in the southern port city of Bushehr, the state IRNA news agency reported.
"The council has also authorized the organization to carry out the necessary studies" to allow Iran to reach its nuclear power production target of 7,000 megawatts by 2020, the report said.
Russia has been building Iran's first light-water reactor near the city but it is not due to become operational before 2005.
The second phase of the project will have a production capacity of 1,000 megawatts, the council said. Iran ultimately wants to build six reactors in the area.
The council -- which did not disclose any date for the start of the second phase -- also mentioned for the first time the construction of a particle accelerator.
IRNA said equipment "related" to the accelerator was expected to be completed, although the country's atomic energy organization could not confirm the information.
Oil-rich Iran says it is going ahead with its civilian nuclear program to satisfy the growing demand for power and prevent long-term energy shortages.
But its archfoe the United States suspects it of covertly developing nuclear weapons under the guise of its civilian program, allegations strongly denied by Tehran.
The international community is urging Tehran to be more open about its nuclear program and, in particular, to sign an additional protocol to the Non-Nuclear Proliferation Treaty.
The protocol is meant to allow inspectors of the UN International Atomic Energy Agency (IAEA) to carry out unannounced spot checks.
At present Iran is only obliged to accept pre-arranged visits to sites it chooses to declare.
Washington is also pushing Russia to halt nuclear cooperation with Iran altogether. Moscow has refused, but is also urging Tehran to accept stricter UN inspections.
Russia has still not delivered the atomic fuel for Iran's first nuclear reactor and, in an apparent concession to US demands, has asked for guarantees Tehran will return the atomic fuel to prevent it from being used for other purposes.
The contract for the atomic fuel deal has yet to be signed.
In July 2002, Moscow adopted a 10-year nuclear cooperation project with Tehran that stipulates the extension of Bushehr, the construction of a nuclear plant with two reactors in the southwestern region of Ahwaz.
Gholamreza Aghazadeh, head of Iran's atomic agency, said Wednesday that Iran and the IAEA should reach "positive" results by September over Tehran signing the additional NPT protocol.
He said discussions with IAEA experts had eased "some of Iran's uncertainties," on the implementation of the protocol, particularly with regard to military secrets and strategy.
Some Iranian conservatives are opposed to the signature of the NPT additional protocol and have even called on Iran to renounce the treaty because they fear the IAEA inspectors would use it to violate military and strategic secrets.