Diplomats close to the Vienna-based International Atomic Energy Agency said that the IAEA inspectors had found the components of a sophisticated centrifuge of a type Tehran had failed to declare while claiming to provide full disclosure on its atomic program.
IAEA officials refused comment but a diplomat said IAEA inspectors had found "design components of a G-2 centrifuge," an advanced model of what is the crucial machine used in configurations of hundreds of gas centrifuges to enrich uranium for either civilian power use or for making an atomic bomb.
The diplomats did not, however, confirm reports in the US newspaper USA Today that the G-2 elements were found on an Iranian military base.
"There's been some 'R and D' going on," a diplomat said referring wryly to hidden research and development activities by the Iranians.
In Washington, the White House said it had "serious concerns" about the reports.
"We have long said that our belief is Iran is pursuing a nuclear weapons program under the cover of a peaceful effort," spokesman Scott McClellan said.
But Iran's foreign ministry denied "in the strongest possible terms," reports "that there are centrifuges of this type in a military base."
Spokesman Hamid Reza Asefi said these reports were "without any basis and we deny them in the strongest possible terms."
Asefi said Iran's research into advanced centrifuges was "a purely scientific project" for research and that such centrifuges had "never been put into service."
He said Iran had "never carried out any nuclear activity for military purposes."
It was not clear whether this new discovery would be the "smoking gun" the IAEA, which will take up the Iran nuclear issue at March 8 meeting here, could use to take Tehran before the UN Security Council, where the Islamic Republic could face sanctions.
One diplomat said the centrifuges found would have to be an actual hidden production facility, rather than just research work, in order to breach Iran's claim to have suspended uranium enrichment as a confidence-building measure with the IAEA.
But a Western diplomat said that if the reports were confirmed they would be "another piece of evidence that supports the position that there is a nuclear weapons program in Iran and military involvement in that program."
The IAEA had given Iran an ultimatum that expired last October 31 for the Islamic Republic to reveal all details of its nuclear program and is preparing a report on Iranian compliance which is to be released over the next few days to the 35 board member nations ahead of the March 8 meeting.
Iran had previously only declared a less sophisticated centrifuge model, the so-called G-1.
USA Today quoted US and foreign sources in saying IAEA inspectors had found sophisticated uranium-enrichment machinery at an air force base outside Tehran.
The machinery, described as a gas-centrifuge system that had been constructed and tested, was found at Doshen-Tappen air base, said the daily.
Although the system is used to refine uranium for nuclear reactors or nuclear bombs, there was no indication any uranium had been inserted or enriched in the machinery, the sources told the daily.
Diplomats at IAEA headquarters said last week that UN nuclear weapons inspectors in Iran had found blueprints for the G2.
The father of Pakistan's atomic bomb, Abdul Qadeer Khan, has confessed to assembling a vast international network that helped both Libya and Iran to obtain centrifuge designs.
Nuclear experts in Vienna said Khan was selling designs for a basic centrifuge known as a G-1, which the Iranians had admitted to having, but that the new design was for a G-2, an improved and more efficient version.
They said the IAEA was using revelations from Libya to track what Iran was doing, since they were being supplied by the same black market.