Iran said it will "never" suspend its enrichment of uranium, in defiance of demands from world powers to suspend the sensitive nuclear activity, the official IRNA agency reported.

"The United States and their allies want to oblige Iran to suspend its uranium enrichment in an illegal manner," IRNA quoted Iran's ambassador to the International Atomic Energy Agency (IAEA) Ali Asghar Soltanieh as saying.

"But Iran will never submit to such an illegal act," he added.

Soltanieh made his remarks in a speech late Tuesday to the School of Oriental and African Studies (SOAS) in London, IRNA said.

The comments are the latest indication that Tehran could reject the key demand of suspending uranium enrichment in a new package to end the standoff presented by world powers to Iran on Saturday.

The package - presented by EU foreign policy chief Javier Solana - offers Iran talks on a package of technological and economic incentives, so long as it suspends uranium enrichment.

The West wants Iran to suspend enrichment over fears it could use the process to make nuclear weapons but Tehran says it only wants electricity for a growing population whose fossil fuels will eventually run out.

"The objective of the Americans is to push Iran to leave the IAEA and the nuclear Non-Proliferation Treaty but Iran will neither accept leaving the IAEA, NPT or suspending uranium enrichment," said Soltanieh.

The UN nuclear watchdog has been investigating Iran's nuclear drive for over five years but has never been able to conclude whether the programme is peaceful.