Iran has unplugged banks of centrifuges involved in its most sensitive uranium enrichment work, prompting the United States and European Union to partially lift economic sanctions.
It puts into effect a landmark deal aimed at easing concerns over Iran's nuclear programme.
The steps start a six-month clock for Tehran and the world powers to negotiate a final accord that the US administration and its European allies say will be intended to ensure Iran cannot build a nuclear weapon.
In the meantime, the interim deal puts limits on Iran's programme though it continues low levels of uranium enrichment. Tehran denies its nuclear efforts are intended to produce a bomb.
The payoff for Iran is an injection of billions of dollars into its crippled economy over the next six months from the suspension of some sanctions, though other sanctions remain in place.
British Foreign Secretary William Hague called the deal "an important milestone" but not the ultimate goal.
"It's important that other sanctions are maintained and the pressure is maintained for a comprehensive and final settlement on the Iranian nuclear issue," Mr Hague said.
The Europeans are aiming to start negotiations on a final deal in February, though no date or venue has been agreed on yet. Iranian foreign minister Mohammad Javad Zarif said on Saturday that Tehran is ready to enter talks as soon as the interim deal goes into force.
In the first step of the interim accord, Iranian state TV said authorities disconnected cascades of centrifuges producing 20% enriched uranium at the Natanz facility in central Iran.
The broadcast said international inspectors were on hand to witness the stoppage before leaving to monitor suspension of enrichment at Fordo, another site in central Iran.
Iran also started to convert part of its stockpile of 20% enriched uranium to oxide, which can be used to produce nuclear fuel but is difficult to reconvert for weapons use, the official IRNA news agency said.
After receiving independent confirmation of the steps from the United Nations watchdog, the International Atomic Energy Agency, EU foreign ministers in Brussels approved the partial sanctions suspension.
The White House also announced the suspension of some sanctions on Iran.
"These actions represent the first time in nearly a decade that Iran has verifiably enacted measures to halt progress on its nuclear programme, and roll it back in key respects," White House press secretary Jay Carney said in a statement.
He said Iran is also providing U.N. inspectors with increased transparency, including more frequent and intrusive inspections. "Taken together, these concrete actions represent an important step forward," he said.
Under the deal reached in November in Geneva, Iran agreed to halt its 20% enrichment programme but continue enrichment up to 5%.
Iranian vice president Ali Akbar Salehi said his country has a total of 196 kilograms of 20% enriched uranium and will convert half of it to oxide over a period of six months. The remaining half will be diluted to a level below 5% level within three months.
Uranium enriched to a high degree - above 90% - can be used to build a nuclear warhead. Enriched below 5%, it can power an electricity-generating reactor, and at 20% it can power reactors used to produce medical isotopes. The enrichment is done by spinning the uranium in a series of centrifuges.
Iran will also refrain from commissioning its under-construction 40 megawatt heavy water reactor in Arak, central Iran. That reactor can produce plutonium, another route to building a warhead.
Under the deal, the number of IAEA inspectors in Iran will "roughly double," said Tero Varjoranta, an agency deputy director general. That would increase the agency's presence on the ground to a maximum of eight inspectors in Iran at any time.
IAEA inspectors will have daily access to Iran's enrichment facilities, a senior diplomat familiar with details of the implementation plan said.
In exchange for the nuclear curbs, Iran receives a halt to new sanctions and easing of some existing sanctions. Measures targeting petrochemical products, gold and other precious metals, the auto industry, passenger plane parts and services will be lifted immediately.
The Geneva deal allows Iran to continue exporting crude oil in its current level, which is reported to be about a million barrels a day.
Senior US administration officials have put the total relief figure at some seven billion US dollars (£4.25 billion) of an estimated 100 billion dollars (£60 billion) in Iranian assets in foreign banks.
Iran is to receive the first 550 million dollar (£334 million) instalment of 4.2 billion dollars (£2.55 billion) of its assets blocked overseas on Febuary 1. .
Iran's hard-liners have called the deal a "poisoned chalice", highlighting the difficult task President Hasan Rouhani faces in selling the accord to skeptics.
Hard-line media denounced the bargain. The Vatan-e-Emrooz daily was printed in black instead of its usual colours, a sign of sorrow and mourning.
It declared the deal a "nuclear holocaust" and called it a gift to Israel's prime minister Benyamin Netanyahu. "Today, Netanyahu is the happiest person in the world," it said.
However, the Israeli prime minister has made the opposite argument: He says the deal gives Iran too much for too few concessions.