The announcement means the country is no longer complying with the agreement it signed with the United States and five other nations in 2015.
The move comes after US President Donald Trump withdrew from the deal and re-introduced economic sanctions in 2018.
Iran announced a partial withdrawal from the deal in May. Sunday marked the end of a 60-day ultimatum the country gave to the European signatories of the deal to ease sanctions on its banking and oil sectors.
Formally known as the Joint Comprehensive Plan of Action (JCPOA), the nuclear accord was intended to limit Iran's civilian nuclear program and prevent it from developing nuclear weapons.
Iranian government spokesperson Ali Rabiei said Iran would cross the agreed 3.67% threshold on Sunday. He added that future concentration will be based on Iran's needs.
Keeping uranium enrichment to below 3.67% was one of the commitments Iran made in return for the lifting of economic sanctions in 2015. The level is enough for civil use to power parts of the country, but not enough to build a nuclear bomb.
Iran made two other major commitments as part of the deal. It agreed to reduce the number of its centrifuges, the tube-shaped machines that are used to enrich uranium, by two-thirds, and to slash its stockpile of enriched uranium by 98%.
Iran's Foreign Minister Javad Zarif sent a letter to the European Union's foreign representative Federica Mogherini to inform her Iran would no longer adhere to the deal's commitments, according to the country's foreign ministry spokesman Seyed Abbas Araghchi.
"We will give an additional 60 days of time starting today before taking further steps," he wrote in Sunday's letter.
An EU spokesperson said the bloc was "extremely concerned at Iran's announcement."
"We strongly urge Iran to stop and reverse all activities inconsistent with its commitments under the JCPOA ... we are in contact with the other JCPOA participants regarding the next steps," the spokesperson said.
Israel has already called on European leaders to impose sanctions on Iran. "The enrichment of uranium is made for one reason and one reason only -- it's for the creation of atomic bombs," Prime Minister Benjamin Netanyahu said at a Cabinet meeting Sunday morning.
The International Atomic Energy Agency said Sunday its inspectors would verify Iran's announcement.
"We are aware of Iran's announcement related to its uranium enrichment level. IAEA inspectors in Iran will report to our headquarters as soon as they verify the announced development," Fredrik Dahl, the agency's spokesperson, told CNN.
The 2015 deal was signed following two years of intense negotiations by the United States, China, France, Germany, Russia and the United Kingdom in 2015.
Trump's decision to ditch the deal -- one of the landmark achievements of his predecessor in the White House, Barack Obama -- put pressure on the remaining signatories. They could either side with Trump and risk Iran developing a nuclear weapon, or try to save the deal and possibly exposing themselves to potential US sanctions.
The announcement from Iran came despite a last ditch effort by French President Emmanuel Macron to salvage the agreement.
Macron discussed the deal with the Iranian President Hassan Rouhani during a phone call Saturday, according to Iran's official news agency IRNA and the Élysée presidential palace in Paris.
The French statement said Macron agreed with Rouhani to explore options "for a resumption of dialogue between all parties" by July 15.
President Macron voiced "his strong concern about the risk of a further weakening of the 2015 nuclear agreement, and the consequences that would necessarily follow."
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