"If anyone allows themselves to invade Iranian territory and its legal interests… our armed forces will break their hands before they pull the trigger," Ahmadinejad told a military parade.
"Our nation is seeking friendship and peace… but today it is not in a position to show the least flexibility towards its bullying enemies," he said in the speech marking the 28th anniversary of Iran's 1980-1988 war with Iraq.
In Israel, former army chief Moshe Yaalon told military radio that Iran threatens the West in the same way Adolf Hitler once did and that if economic and political sanctions fail conflict will be "inevitable."
"Today, we in the West are facing the same situation, the lack of decisiveness towards a threat that is no less severe than that which Hitler posed in 1939," he said.
"We can still stop Iran with political and economic measures but if we do not, then a military confrontation is inevitable," Yaalon said.
The broadsides came on the eve of a meeting of the International Atomic Energy Agency's board on Monday where the UN nuclear watchdog will discuss the stalemate in its probe into Iran's nuclear drive.
The watchdog has been investigating the Islamic republic's nuclear programme for five years, but has so far been unable to determine whether the programme is entirely peaceful as Iran claims.
At the moment, the agency and Iran are — in the words of a senior official — "gridlocked" over Tehran's refusal to provide proof that it was not involved in studies to make a nuclear warhead, as a wide range of intelligence suggests.
Iran insists its nuclear work is aimed only at generating electricity and has repeatedly warned of massive retaliation against any strike on its soil.
And during Sunday's parade, Iran's armed forces, including the elite Revolutionary Guards, showcased their weaponry.
On display were the long-range Shahab-3 missile and Qadr-1, both of which a military commentator said have a range of 2,000 kilometres (1,240 miles). That would put the borders of Israel, 1,000 kilometres (620 miles) away, within their reach.
Banners displayed on trucks bore slogans including "Israel must be eliminated from the universe" and "Down with the USA."
No European military attaché was present, and a European diplomat told AFP that all EU embassies had been told not to attend the parade because of the possibility of the display or chanting of anti-Israel slogans.
Israel has long considered Iran its main strategic threat because of its accelerating nuclear schedule and Ahmadinejad's frequent predictions of the demise of the Jewish state.
Israel, the region's sole if undeclared nuclear armed state, and the United States have said they prefer to address the nuclear issue diplomatically, but neither country has ruled out the use of military force.
