Iran began enriching uranium to 20 percent purity level Tuesday in defiance of world powers but under the supervision of inspectors from the U.N. nuclear watchdog, state media reported.

Al-Alam television quoted a source from Iran's atomic body as telling the state-owned Arabic-language channel that "Iran has started enriching uranium to 20 per cent in the presence of IAEA [International Atomic Energy Agency] inspectors at Natanz," AFP reported.

The United States and France said on Monday they will push for "strong" new U.N. anti-nuclear sanctions against Iran after Tehran announced it was going to step up its enrichment of uranium.

Iran's main enrichment facility is located in the central city of Natanz where sensitive atomic work has continued for years despite three sets of U.N. sanctions.

Iran on Monday formally told the U.N. nuclear body of its plan to produce higher enriched uranium, sparking sanctions warnings by world powers who want Tehran to enter a fuel swap deal designed to allay their fears about the Islamic republic's nuclear program.

World powers led by Washington suspect Tehran is enriching uranium to make atomic weapons as the material in high purity form can be used in the fissile core of a nuclear bomb.

Iran denies the charge, saying it is enriching uranium for peaceful purposes only and specifically wants to process it to 20 percent level so it can be used as fuel to power a research reactor in Tehran which makes medical isotopes.

An IAEA-brokered deal envisages Tehran being supplied with nuclear fuel for the reactor in exchange for its low-enriched uranium (LEU).

The deal has hit a roadblock as Tehran, although saying it is ready "in principle" to sign on to it, insists that not all its LEU be shipped out in one go.

President Mahmoud Ahmadinejad on Sunday ordered Iran's atomic chief Ali Akbar Salehi to begin enriching uranium to 20 per cent, saying world powers had not agreed to Tehran's conditions for the deal.

French President Nicolas Sarkozy and U.S. Defense Secretary Robert Gates in talks in Paris on Monday "agreed that the time has come for the adoption of strong sanctions, in the hope that dialogue will be resumed," an official at the French presidency said.