VIENNA (REUTERS) - Iran has halted its most sensitive nuclear activity under a ground-breaking deal with world powers, a confidential U.N. atomic agency report obtained by Reuters showed, paving the way for the easing of some Western sanctions.

The report by the International Atomic Energy also said Iran had begun diluting its stockpile of uranium enriched to the fissile concentration of 20 per cent - a level that took it closer to the capability of producing fuel for an atom bomb.

The IAEA report to member states said: "The Agency confirms that, as of 20 January 2014, Iran ... has ceased enriching uranium above 5 per cent U-235 at the two cascades at the Pilot Fuel Enrichment Plant (PFEP) and four cascades at the Fordow Fuel Enrichment Plant (FFEP) previously used for this purpose."

It was referring to Iran's two enrichment plants, at Natanz and Fordow. Cascades are interlinked networks of centrifuge machines that enrich uranium. Iranian state television earlier said Iran had suspended 20 percent enrichment at Natanz and that inspectors were heading to Fordow.

"The suspension of 20 per cent enrichment has started at the Natanz plant and the International Atomic Energy Agency inspectors are going to the Fordow plant," state TV quoted the deputy head of Iran's Atomic Energy Organisation, Behrouz Kamalvandi, as saying.

The IAEA report also listed other measures Iran had agreed to under the interim accord with the six world powers - the United States, France, Britain, Germany, China and Russia.

Those included an undertaking that Iran would not build any more enrichment sites during the six-month agreement, a step meant to buy time for negotiations on a final settlement of Tehran's decade-old nuclear dispute with the six powers.

Enriched uranium can have both military and civilian purposes. Iran denies Western allegations that it has been seeking to develop the capability to make nuclear bombs, saying it wants only civilian atomic energy.