"Once converted into U3O8, it's not usable for producing bomb grade uranium and of little proliferation concern," Bonabi told The Associated Press.
Iran insists it does not seek atomic weapons and is only using nuclear technology for energy production and medical applications.
Naqavi, spokesman of the parliament's security committee, said the move is expected to facilitate talks between Iran and the world powers and pave the way for a diplomatic solution over Tehran's nuclear activities.
"Iran has demonstrated" its rejection of nuclear arms, said the lawmaker Naqavi, spokesman of the parliament's security committee.
But the former IAEA official, Heinonen, estimated Iran is still producing about 15 kilograms (33 pounds) of 20 percent enriched uranium a month. That could rise to 20 kilograms (44 pounds) a month if Iran expands work at an enrichment facility in Fordo, which is dug deep into a mountainside south of Tehran.
Some experts say Iran would need 200 to 250 kilograms of 20 percent uranium to turn into one nuclear warhead. Others say anything above 170 kilograms is enough.
Mark Fitzpatrick, director of the Nonproliferation and Disarmament Program at the International Institute for Strategic Studies, said Iran's decision to produce U308 is "slightly reassuring."
"It tends to confirm that there is a civilian purpose in enriching to this level," he said in an emailed statement.
But Fitzpatrick and another American nuclear scientist disputed Bonabi's assertion that Iran doesn't have the technology to reconvert the material.
Iranian engineers have the know-how to convert the U308 powder back to gas for the enrichment centrifuges, Fitzpatrick said.
"It would not take long to set it up," he said, noting the procedure is similar to the existing conversion line of uranium ore concentrate — known as yellowcake — to a gas known as UF6 that is the feedstock for enrichment.
Matthew Bunn, an associate professor at Harvard's John F. Kennedy School of Government, also said Iran has the ability to reconvert the oxide into uranium gas.
"It is possible ... Iran has the technology," he said.
Heinonen noted, however, that any debate about Iran's conversion to the U308 powder "might not really be an issue" since it already has a critical mass of 20 percent enriched uranium.
"And the stocks are likely growing," he said
Associated Press writer George Jahn in Vienna contributed to this report.