Mahmoud Ahmadinejad, the Iranian president, heaped scorn on the offer in a nationally televised speech on Wednesday.
"They say they want to offer us incentives," he said. "We tell them: Keep the incentives as a gift for yourself. We have no hope of anything good from you."
Iran's foreign ministry spokesman, Hamid Reza Asefi, joined the counter-attack, mockingly offering the Europeans trade concessions if they dropped their opposition to its nuclear programme.
"We are prepared to offer economic incentives to Europe in return for recognising our right [to enrich uranium]," state radio quoted him as saying.
The EU is drawing up a package of trade and technological incentives - including a light-water reactor - for Iran to stop enriching uranium.
The West fears the enriched uranium could be diverted to build a nuclear weapon but Tehran says it only wants to generate energy.
"They say they want to offer us incentives. We tell them: Keep the incentives as a gift for yourself. We have no hope of anything good from you"
A light-water reactor is considered less likely to be misused for nuclear proliferation than is a heavy-water facility.
Ahmadinejad issued his retort to the EU in the city of Arak, the site of a heavy-water reactor that is scheduled for completion by early 2009.
Such facilities produce plutonium as a by-product, which can be used to build nuclear weapons.
The president said Tehran had put its trust in the European Union in 2003 and suspended its nuclear activities as a confidence-building measure.
The deal called for guarantees that Iran's nuclear programme was only intended to building reactors for electricity generation and not to develop weapons.
Iran agreed to the request, but negotiations collapsed in August 2005 when the Europeans said the best guarantee was for Iran to permanently give up its uranium enrichment programme.
Iran responded by resuming reprocessing activities at its uranium conversion facility in Isfahan.
"We won't be bitten twice," Ahmadinejad said on Wednesday.
In his speech on television, he said Iran would continue enrichment and scolded the Europeans for doing the work of the Americans.
"We recommend that you not sacrifice your interests for the sake of others," he said.