The reactor is part of Pakistan's programme to increase the production of weapons-grade plutonium.
"A recently purchased Digital Globe high resolution satellite image dated January 15, 2015, shows that Khushab's fourth reactor's external construction is complete and has become operational," David Albright and Serena Kelleher-Vergantini of the Institute for Science and International Security said on Friday.
"This assessment is based on the presence of a very specific signature: steam is venting from the reactor's cooling system," he said.
Pakistan's nuclear arsenal is increasing at a pace faster than any other country and now is reported to have more nuclear weapons than that of India.
Albright and his co-author said Pakistan's Khushab nuclear site, located 200 kilometres south of Islamabad, is dedicated to the production of plutonium for nuclear weapons.
"Its expansion appears to be part of an effort to increase the production of weapons-grade plutonium, allowing Pakistan to build a larger number of miniaturised plutonium-based nuclear weapons that can complement its existing highly enriched uranium nuclear weapons," they wrote.
"Originally, the site consisted of a heavy water production plant and an estimated 50 megawatt-thermal (MWth) heavy water reactor, both of which became operational in the 1990s. However, Pakistan initiated the construction of a second heavy water reactor between the year 2000 and 2002, a third one in 2006, and a fourth one in 2011," they said.
Noting that Pakistan has never provided public information regarding any of the Khushab reactors, Albright and Kelleher-Vergantini said terefore, the power output can only be estimated.
ISIS estimates the power of the original heavy water reactor to be about 50 MWth while reactors 2, 3, and 4 are believed to generate double or more the power of the first one, and are thus capable of producing more than double the amount of weapon-grade plutonium per year.
A technical consultant to ISIS with years of experience in heavy water reactors assessed for ISIS that the power of these newer heavy water reactors is likely to be larger than the first one and that over time their power could be further increased.
The increase in power can be accomplished by using more advanced fuel or adding heat removal capacity, they wrote.