Israel says it was not fooled by assurances from Iranian President Mahmoud Ahmadinejad that his country's nuclear program posed no threat.
Mr Ahmadinejad launched a new phase in the Arak heavy-water reactor project on Saturday, saying Iran would not give up its right to nuclear technology despite Western fears it aims to make atomic bombs.
"Israel is not fooled by such declarations, the sole aim of which are to avoid sanctions being imposed on Iran" by the UN Security Council, government spokesman Avi Pazner told AFP.
Mr Ahmadinejad was speaking just days before an August 31 deadline set by the UN Security Council for Iran to halt uranium enrichment - the West's biggest worry in Iran's atomic program - or face possible sanctions.
"Iran is not a threat to anybody, not even to the Zionist regime," Mr Ahmadinejad said, using Iran's term for its arch-enemy Israel, which the Islamic Republic does not recognise.
He said "one cannot deprive any nation from its rights. The Iranian nation will defend its rights to nuclear technology with force".
The heavy water plant at Arak will supply heavy water to be used as cooling fluid for a 40 mega watt research reactor due for completion by 2009.
The International Atomic Energy Agency (IAEA) has voiced concern over the risk of diversion of nuclear materials, as the research reactor could produce 8-10 kilograms of plutonium a year - enough to make at least two nuclear bombs.
A White House spokeswoman said on Saturday the United States, Russia, China, Britain, France and Germany were consulting about Iran's response to the the package of incentives the six offered Iran to halt uranium enrichment.
"We all share the goal of preventing Iran from acquiring a nuclear weapons capability," spokeswoman Dana Perino said.
Photographers and TV journalists were asked not to take any images except in areas where they were specifically permitted.
The Arak complex was protected by dozens of anti-aircraft guns and surrounded by a four-metre high barbed wire fence.
The head of Iran's Atomic Energy Organisation, Gholamreza Aghazadeh, told the students' ISNA news agency that IAEA inspectors would visit Arak next week.
Western countries, led by the United States, say Iran wants to create nuclear weapons, but the Islamic republic insists it only wants civil nuclear power and has the right to master the required technology.
The UN Security Council resolution setting the August 31 deadline to halt enrichment also cited a call by the UN watchdog, the IAEA, for Iran to reconsider building its heavy water reactor project.
