Farid Mortazavi, the graphics editor for Hamshahri newspaper, which is published by Tehran's conservative-run municipality, said on Monday: "It will be an international cartoon contest about the Holocaust."
He said the plan was to turn the tables on the assertion that newspapers can print offensive material in the name of freedom of expression.
"The Western papers printed these sacrilegious cartoons on the pretext of freedom of expression, so let's see if they mean what they say and also print these Holocaust cartoons," he said.
Iran's anti-Israeli government is supportive of so-called Holocaust revisionist historians, who maintain the systematic slaughter by the Nazis of mainland Europe's Jews as well as other groups during the second world war has been either invented or exaggerated.
Mahmoud Ahmadinejad, Iran's president, prompted international anger when he said the Holocaust was a "myth" used to justify the creation of Israel.
Mortazavi said Tuesday's edition of the paper will invite cartoonists to enter the competition, with "private individuals" offering gold coins to the best 12 artists - the same number of cartoons that appeared in the conservative Danish newspaper Jyllands-Posten.
Last week the Iranian Foreign Ministry also invited Tony Blair, the British prime minister, to Tehran to take part in a planned conference on the Holocaust, even though the idea has been branded by Blair as "shocking, ridiculous, stupid".
Blair also said Ahmadinejad "should come and see the evidence of the Holocaust himself in the countries of Europe", to which Iran responded by saying it was willing to send a team of "independent investigators".