"We are moving toward Iran building capacity and knowledge without the agency in a postion to be able to verify the nature or the scope of that programme," Mohamed Elbaradei told reporters in Luxembourg.
"If we continue in that direction we will end up with a major confrontation, we would reduce the possibilites of a peaceful resolution of that issue," he said on the sidelines of a conference on preventing nuclear catastrophe.
His remarks came a day after his International Atomic Energy Agency (IAEA) released a report that maintains Iran persists in defying UN demands to stop enriching uranium and is expanding the work.
The report could open the door to new sanctions against the Islamic Republic, which is suspected of trying to develop an atomic bomb under the cover of its civilian nuclear programme.
It also noted that the IAEA’s ability to monitor the programme had "deteriorated" due to lack of cooperation.
"Iran needs to listen to the international community and to suspend its enrichment activities as a confidence-building measure but also the international community should do its utmost to engage Iran into comprehensive dialogue," Elbaradei said.
He said it was difficult to say exactly how far Iran was away from developing a nuclear weapon, should it want to do that, but that it could happen in the next decade.
"In other words three to eight years from now," he said.