BBC:
Iran has begun enriching uranium at a heavily fortified underground site, the UN's nuclear watchdog has confirmed.
The International Atomic Energy Agency said medium-level enrichment had begun at the Fordo plant, in northern Iran.
Iran has said it plans to carry out uranium enrichment there - but insists this is for purely peaceful purposes.
The West argues Tehran is building a nuclear weapons capacity. The US called the work at Fordo a "further escalation" in the dispute.
The existence of the facility near Qom, in the north of the country, only came to light after it was identified by Western intelligence agencies in September 2009.
All nuclear material in the (Fordo) facility remains under the agency's containment and surveillance”
Tehran said it began the project in 2007, but the IAEA believes design work started in 2006.
BBC Iran correspondent James Reynolds says the facility has attracted plenty of attention and suspicion.
It is underground, heavily fortified and protected by the armed forces - making it a very difficult target for air strikes.
The US and Israel have refused to rule out attacks on Iranian facilities.
On Monday a spokeswoman for International Atomic Energy Agency (IAEA), Gill Tudor, said the agency could "confirm that Iran has started the production of uranium enriched up to 20%".
She added that "all nuclear material in the facility remains under the agency's containment and surveillance".
Iran insists enriched uranium is needed to make isotopes to treat cancers. But analysts say 20% enrichment is an important step towards making uranium weapons-grade.
In Washington, state department spokeswoman Victoria Nuland said such a level of enrichment was "a further escalation" of the Iranians' "ongoing violations with regard to their nuclear obligations", and suggested "a different kind of a nuclear programme".
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