"This year, it's very likely that Iran will have produced enough low-enriched uranium which, if further enriched, could constitute enough fissile material for one nuclear weapon, if that is the route Iran so desires," IISS's senior fellow for non-proliferation Mark Fitzpatrick said.
However, according to the institute based in Britain, scientists in Iran would have to overcome numerous hurdles and fully master the enrichment of uranium before this can finally take place by 2010.
Iran is defying five United Nations Resolutions by enriching uranium inside an underground plant at Natanz. This process is highly sensitive because it amounts to dual use technology.
If the country goes to the next stage and chooses to produce weapons-grade uranium, however, it would have to expel the International Atomic Energy Agency inspectors who presently monitor its plants.
And, to have a proper weapons system, Iran will need to build missiles capable of delivering a nuclear warhead too.
US President Barack Obama has already pledged to engage directly with Iran's leaders and seek a diplomatic solution to the nuclear confrontation.
"If countries like Iran are willing to unclench their fist, they will find an extended hand from us," Obama has said.
