The renewed assault on Israel by Ahmadinejad -- who has been castigated by world powers for his frequent anti-Israeli outbursts -- came as tens of thousands marched through Tehran in an annual pro-Palestinian protest.
"This regime (Israel) will be gone, definitely," Ahmadinejad, who has previously called for Israel to be "wiped from the map" and described the Holocaust as a myth, told the protestors.
"You (the Western powers) should know that any government that stands by the Zionist regime from now on will not see any result but the hatred of the people," he added. "The wrath of the region's people is boiling."
"Efforts to stabilise this fraudulent regime have completely failed, thank God ... This regime has lost the rationale of its existence," the president said.
Ahmadinejad described his warning as an "ultimatum" for Western powers. "You should not complain that we did not give a warning. We are saying this explicitly now."
"If a hurricane starts be rest assured that the dimensions of this hurricane will not be limited to the geographic borders of Palestine," he added. "This regime (Israel) will take its supporters to the bottom of the swamp."
"The best solution is for you to take all the components of the regime and take it away," Ahmadinejad said.
Chanting "Death to Israel" and predicting the "Triumph of Palestine", tens of thousands of people had earlier converged on Tehran University, where Ahmadinejad gave his speech, to mark Iran's Quds (Jerusalem) Day.
Started on the initiative of Iran's revolutionary leader Ayatollah Ruhollah Khomeini, the event annually attracts massive crowds, many of them government workers, to call for the handing of Jerusalem to the Palestinians.
For his part, Foreign Minister Manouchehr Mottaki referred to the sex scandal that has left Iranian-born Israeli President Moshe Katsav facing possible indictment for rape, saying such "ethical deviation" showed Israel was collapsing.
"The Zionist regime is filled with moral corruption and ethical deviation in its highest ranks. Therefore this regime internally, and regionally from the outside, is cracking and is falling apart."
Ahmadinejad also once again questioned the extent of the Holocaust and said that, in any case, it was not right for the Palestinians to pay for events committed on European soil.
"If the Holocaust is real why are those who have the opposite opinion about it being arrested and jailed? If it is true, where did it happen? If it was in Europe, why should it be paid for in Palestine?"
The Iranian government's stance on Israel and the Holocaust has heightened international concern at a time of mounting tension over Tehran's nuclear programme.
The United States accuses Iran of seeking nuclear weapons, a charge vehemently denied by Tehran.
Iran insists it has every right to a full nuclear fuel cycle and has refused to obey repeated UN deadlines to halt sensitive uranium enrichment, which the West fears could be diverted to make weapons.
Ahmadinejad reaffirmed Iran's defiant stance, saying "Iran is ready to negotiate but will not tolerate the slightest pressure."
He also recalled that on a recent visit to the United States he had dared Western powers in an address to a think-tank to shut their own nuclear fuel programmes and let Iran supply the material.
"I told them 'You shut down (your nuclear programmes) and we will produce fuel from the fuel cycle in five years time and sell it to you at a 50 percent discount!'"

Copyright AFP (Agence France-Presse), 2006