The mystery surrounding a reported explosion at Iran's most important and heavily fortified nuclear facility thickens amid contrasting statements by Tehran and Israel.

Iran has denied its bunker-style Fordow nuclear plant, near the holy city of Qom, 150km south of Tehran, suffered extensive structural damage in an underground explosion last week.

"The false news of an explosion at Fordow is Western propaganda ahead of nuclear negotiations to influence their process and outcome," Saeed Shamseddin Bar Broudi, deputy chief of Iran's Atomic Energy Organisation, told state news agency IRNA.

However the blast was confirmed with vague details by Israeli intelligence officials to The Times.

"We are still in the preliminary stages of understanding what happened and how significant it is," an Israeli official told the British newspaper.

The official added he wasn't sure if the explosion had been caused by "sabotage or accident," but implied it had indeed happened.

The news was welcomed but not confirmed by Israel's home defence minister and former security service chief Avi Dichter.

"Any explosion in Iran that doesn't hurt people but hurts its assets is welcome," Dichter told journalists.

The explosion was first reported by American right-wing website WND, which quoted Hamidreza Zakeri, a former Iranian intelligence officer living in exile, as saying that 240 people had been trapped underground following a blast that shook facilities within a radius of three miles.

The facility reportedly hosts more than 2,700 centrifuges able to enrich uranium to more than 20 percent, a level just below the amount required to build a nuclear bomb.

Once described by Iran's civil defence chief as "impregnable," the Fordow site is dug 300 feet into a mountain and designed to withstand an aerial attack.

However the US said it has perfected a new 30,000lb bunker-busting bomb known as a Massive Ordnance Penetrator which, dropped by a B-2 stealth bomber, has been made to hit heavily fortified targets such as Fordow.