But the United States pointed out that the report confirmed Iran had 3,000 centrifuges, was less forthcoming with current activity and continued to defy UN demands to suspend its uranium enrichment programme.
"America says Iran getting a nuclear weapon could cause WW3 but I think it's more likely that America would cause WW3 by invading Iran"
Jack, Bangor, UK
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The IAEA acknowledged that Iran had provided "sufficient access" to inspectors and responded in a "timely manner" to queries.
"However, its co-operation has been reactive rather than proactive," it said, noting that Iran still refused to suspend uranium enrichment.
Specifically, the IAEA complained that Iran had not met repeated UN demands to suspend its enrichment-related activities.
In Tehran, Jalil warned that a third round of UN sanctions would affect co-operation with the IAEA.
He said the report proved that Iran's atomic drive was peaceful and that claims of any military intentions "are not true".
"For those who had doubts about the Iranian nuclear programme, the report is very clear and indicates that the basis upon which the nuclear case was referred to the security council has collapsed," said Jalili.
UN officials in Vienna highlighted the positive aspects of the report, saying they had made "substantial progress".
"The work plan has started to kick in after so much scepticism," one of the officials close to the IAEA said, referring to a deal with Iran for full disclosure.
Push for sanctions
But the US said it would seek greater UN sanctions for as long as Iran refused to suspend uranium enrichment.
"I don't think that China would want to be in a position to cause the failure of diplomacy to deal with this issue"
Zalmay Khalilzad, US envoy to UN
Gregory Schulte, the US envoy to the IAEA, said the report showed that Iran had "failed the test of full disclosure" because of its "selective and incomplete" co-operation.
The US also criticised China for dragging its feet on a new resolution.
Zalmay Khalilzad, the US ambassador to the UN, warned that China would be responsible if diplomatic solutions failed in dealing with Iran.
"I don't think that China would want to be in a position to cause the failure of diplomacy to deal with this issue," he said.
"I think it's in everyone's interest for this world-defining issue to be resolved diplomatically."