Iran says it has amassed more low-enriched uranium than permitted under its 2015 deal with world powers, drawing a warning from US President Donald Trump that it is "playing with fire".
Tehran's announcement marks its first major step beyond the terms of the nuclear pact since the United States pulled out of it more than a year ago.
However Iranian Foreign Minister Mohammad Javad Zarif said on Monday the move was not a violation of the accord, arguing Iran was exercising its right to respond to the US walkout.
The step, however, could have far-reaching consequences for diplomacy at a time when European countries are trying to pull the United States and Iran back from confrontation.
It comes less than two weeks after Trump said he ordered air strikes on Iran, only to cancel them minutes before impact.
Iran's semi-official Fars news agency reported the country's enriched uranium stockpile has now passed its allowed 300 kg limit.
The UN nuclear watchdog, the International Atomic Energy Agency, which monitors Iran's nuclear program under the deal, confirmed in Vienna Tehran the breach.
Trump, asked if he had a message for Iran, said: "No message to Iran. They know what they're doing. They know what they're playing with, and I think they're playing with fire. So, no message to Iran whatsoever."
The White House said it would continue to apply "maximum pressure" until Iran's leaders alter their course.
However there is no international standard prohibiting Iran enriching uranium, said Daryl Kimball, executive director of the Arms Control Association. "That is not the case. That is an American position."
European powers, who remain party to the accord and have tried to keep it in place, urged Iran not to take further steps that would violate it. But they held off on declaring the agreement void or announcing sanctions.
"We have NOT violated the #JCPOA," Zarif wrote on Twitter, referring to the deal by the acronym for its formal title, the Joint Comprehensive Plan of Action.
He referred to a paragraph of the accord which contains the mechanism for countries to resolve disputes over compliance.
"As soon as E3 abide by their obligations, we'll reverse," he said, referring to European powers Britain, Germany and France. Iran has demanded they guarantee it the access to world trade envisioned under the deal.
The move is a test of European diplomacy after French, British and German officials had promised a strong diplomatic response if Iran fundamentally breached the deal.
The Europeans, who opposed last year's decision by Trump to abandon the agreement had pleaded with Iran to keep within its parameters.
The nuclear deal imposes limits both on how much enriched uranium Iran can hold and on how pure its stocks can be, thresholds intended to lengthen the the time Tehran would need to build a nuclear bomb.
