The two countries have agreed to jointly build a plant to make a centrifugal separator in Kusong, 40 kilometers (25 miles) northwest of Anju, a site known for nuclear development by Pyongyang, the Sankei Shimbun said, citing an unnamed military source.
Under the accord, reached during the visit by a senior Iranian military officer to Pyongyang in late January, both nations will use the machinery, with Iran planning to import it as "industrial goods" through a third country, the Sankei said.
South Korea detected more than 70 test explosions by the North at Kusong, the paper said.
Washington has accused the North of a program to enrich uranium in defiance of a 1994 anti-nuclear pact while Pyongyang has denied having an enriched uranium program but admits it has plutonium bombs.
The Sankei reported earlier this year that North Korea and Iran were involved in the development of weapons of mass destruction in Libya.