Iranian President Mahmoud Ahmadinejad had threatened to eliminate the Jewish state and the government was taking legal advice on launching a case against him at the international court in the Hague, Rudd said.
"The Iranian president's repeated extraordinary statements, which are anti-Semitic and expressing a determination to eliminate the modern state of Israel from the map, are appalling by any standards of current international relations," he told Sky News.
"They are an incitement of international violence and what we have said in the past is that we will take legal advice, which the attorney-general is currently doing, on whether there is a profitable way forward here through the appropriate international legal mechanisms and we'll study that advice carefully."
Rudd was commenting on a report in The Australian newspaper that he had promised Australia's Jewish community last year that if he won power in November elections his government would act against Ahmadinejad.
Iran does not recognise the Jewish state, and since becoming president in 2005 Ahmadinejad has repeatedly provoked international outrage by predicting that Israel is doomed to disappear.
He has also caused controversy by playing down the scale of the Holocaust.
Rudd said the comments were "dangerous stuff" in the context of international relations.
"It's not just hyperbole from the bully pulpit of Tehran, it's the roll-on effect across the Islamic world, particularly those who listen to Iran for their guidance," he said.
Attorney-General Robert McClelland confirmed to The Australian that the government was seeking legal advice on taking Ahmadinejad to the International Court of Justice.
"The government considers the comments made by Iranian President Mahmoud Ahmadinejad, calling for the destruction of Israel and questioning the existence of the Holocaust, to be repugnant and offensive," McClelland said.
"The government is currently taking advice on this matter."
