He also said that Tehran would be ready for talks with the West if they are based on respect and justice.
"The Iranian nation has from the beginning been after logic and negotiations, but negotiations based on justice and complete respect for rights and regulations," Ahmadinejad said in a televised speech.
The nuclear fuel manufacturing plant will produce pellets of uranium oxide to fuel the heavy-water research reactor, which is scheduled to be completed in 2009 or 2010.
The process is distinct from uranium enrichment, which produces fuel for a light-water reactor. Highly enriched uranium can be used to build a warhead as well. Iran's enrichment program presents more immediate concerns to the West than the hard-water reactor, because it is far more advanced.
Iran denies any intention to build a nuclear weapon. The U.S. and its allies have expressed concerns Iran could reprocess spent fuel from the heavy-water reactor into plutonium for building a warhead.
Iran earlier on Thursday said it will decide on an offer of nuclear talks made by the United States and five other world powers after reviewing the details, a senior adviser to Ahmadinejad said.
"We will review it and then decide about it," Ali Akbar Javanfekr told Reuters.
Javanfekr's comments came after U.S. Secretary of State Hillary Clinton said Wednesday that her country would be a "full participant" in talks by major powers with Iran over its nuclear program.
"Obviously we believe that pursuing very careful engagement on a range of issues that affect our interests and the interests of the world with Iran makes sense. There is nothing more important than trying to convince Iran to cease its efforts to obtain a nuclear weapon," Clinton told reporters.
Clinton's announcement marked another significant shift from former U.S. President George W. Bush's policy toward a nation he labeled a member of the Axis of Evil.
On Wednesday, the State Department said the U.S. would be at the table from now on when senior diplomats from the five permanent members of the United Nations Security Council and Germany meet with Iranian officials to discuss the nuclear issue.
The Bush administration had generally shunned such meetings, although it
attended one last year.
U.S. State Department spokesman Robert Wood said the decision to engage Iran was conveyed to representatives of Britain, China, France, Germany, Russia by the third-ranking U.S. diplomat William Burns at a Wednesday meeting in London.
That group, known as the P5+1, announced earlier that it would invite Iran to attend a new session aimed at breaking a deadlock in the talks.
"The U.S. remains committed to the P5+1 process; what is different is that the U.S. will join P5+1 discussions with Iran from now on," Wood said, adding that Washington was hopeful Iran would attend.
"If Iran accepts, we hope this will be the occasion to seriously engage Iran on how to break the logjam of recent years and work in a cooperative manner to resolve the outstanding international concerns about its nuclear program," he said.
Any breakthrough will be the result of the collective efforts of all the parties, including Iran.
Wood said the administration wants a diplomatic resolution to the nuclear
issue and believes that requires a willingness to engage directly with each other on the basis of mutual respect and mutual interests.
"We hope that the government of Iran chooses to reciprocate," he added.
The invitation is to be sent to the Iranians by European Union foreign policy chief Javier Solana. In a statement the group said it welcomed the new direction of U.S. policy toward Iran. No time frame was given for a date of the meeting.