Iran is expanding its nuclear activity at an underground site deep inside a mountain, diplomats told Reuters.

A nuclear facility under construction near the holy city of Qom is fuelling Western suspicion of Iran's intentions over its nuclear weapons programme.

Envoys from the United Nations nuclear watchdog, the International Atomic Energy Agency, have failed to get Iran to deal with international concerns about its nuclear work and returned to Vienna empty-handed after two days of talks in Iran.

The UN agency is now preparing its next report on Iran, which will include information on the new nuclear facility. The bunker will be buried beneath 80 metres of rock and soil, giving better protection against a possible military strike by Israel or the United States.

"I think we will see a jump in the potential state of readiness of the facility," one Vienna-based envoy said.

Meanwhile, a top official of the Islamic republic has announced that Iran is ready to build its first cyber army.

Brig Gen Gholamreza Jalali, commander of the Civil Defence Organisation, claimed Iran would follow the example set by the US in downsizing its standing army for a larger cyber defence infrastructure.

"Countries like Iran also have to set up and upgrade their cyber defence headquarters and even build a cyber army," he told the Iranian state broadcaster Press TV.