Satellite images show work progressing rapidly at Khusab, 100km from Islamabad, where the other two reactors are sited, the Institute for Science and International Security (ISIS) said in a report.

Pakistan carried out its only nuclear tests in May 1998 after similar detonations by rival India, alarming the world. The Islamic republic is now a key ally in the US-led war on terror.

The construction work would "imply that Pakistan's government has made a decision to increase significantly its production of plutonium for nuclear weapons," the institute said in its report.

"Almost all of the third reactor construction visible in the June 3, 2007 image has taken place in the last 10 months," the Washington-based group added.

Pakistan's Foreign Office said the report was based on speculation.

"Off and on there are speculations of this nature. Pakistan has a nuclear weapons programme and Khusab is a declared nuclear site, that is not a new revelation," spokeswoman Tasnim Aslam told AFP.