Mahmoud Ahmadinejad said in a speech broadcast on state radio: "You should believe that this regime [Israel] cannot last and has no more benefit to you. What benefit have you got in supporting this regime, except the hatred of the nations?
"We have advised the Europeans that the Americans are far away, but you are the neighbours of the nations in this region. We inform you that the nations are like an ocean that is welling up, and if a storm begins, the dimensions will not stay limited to Palestine, and you may get hurt."
Ahmadinejad caused outrage last year by calling for Israel to be "wiped off the map", echoing comments by Ayatollah Khomeini, the Islamic Republic's late founder, who established al-Quds or Jerusalem day in 1981. It is a day when Iranians are encouraged to demonstrate in support of the Palestinians.
In the speech, he said: "Today, with the grace of God, the efforts to establish this fake regime have failed totally."
A spokesman for Tony Blair, the British prime minister, said in response to Ahmadinejad's speech: "Unfortunately these remarks do not come as a surprise. They are consistent with what Mr Ahmadinejad has said for some time.
"It's why we take the issue of Iran in general so seriously and the possibility of it acquiring nuclear weaponry so seriously and why the prime minister believes the world must be as united in its message to Iran as it has been in its message to North Korea.
"That is why we will continue to push for and work towards a UN resolution [on sanctions against Iran] in New York."
Philippe Douste-Blazy, the French foreign minister, said in a statement: "I condemn the unacceptable comments made today by the Iranian President Mahmoud Ahmadinejad in which he again calls into question the existence of the state of Israel."
Warriors of Hezbollah
Iranian state television showed crowds on Friday waving banners with pictures of Khomeini and Sayyed Hassan Nasrallah, leader of Iranian-backed Lebanese group Hezbollah.
Iran described Israel's July war with Lebanon as a victory for Hezbollah.
Ahmadinejad said: "The false myth [of Israel being invincible] has fallen by the will of the Palestinian youth and the faithful warriors of Hezbollah."
Meanwhile, thousands of Shiite Muslims denounced Israel and the United States in rallies across Pakistan, demanding the Jewish state hand control of Jerusalem to Muslims.
Chanting "Death to Israel" and "Death to America", about 4,000 people marched through a busy street lined by riot police in Karachi. No violence was reported.
In Syria, nearly 3,000 protesters demonstrated in support of the Palestinians and Lebanese at the Yarmuk refugee camp in southern Damascus.