The warning came in a joint declaration adopted by parliament after a debate on the bill which foresees one year in jail for anyone who denies that the World War I massacres amounted to genocide and was voted by the lower house of the French parliament Thursday.
"The French National Assembly has not only inflicted great damage on bilateral ties but has also dealt a blow to efforts for a normalisation in our ties with Armenia," the declaration said.
It said the bill, which needs to be approved by the French senate and president to become a law, would have serious repercussions on political, economic and military ties with France and also on Armenia itself.
"The hostile policies Armenia employs against... the Turkish people... will cost it dearly," it said.
Ankara has declined to establish diplomatic ties with Yerevan over its campaign for international recognition of the genocide. In 1993, Turkey sealed its border with its eastern neighbour in a gesture of solidarity with close ally Azerbaijan, which was then at war with Armenia, dealing a heavy economic blow to the impoverished nation.
Diplomats from Turkey and Armenia have been holding exploratory talks since last year in a bid to normalise ties, but there has so far been no word on their progress.
Speaking in the general assembly before the adoption of the declaration, Foreign Minister Abdullah Gul also warned of a deterioration in French-Turkish ties and said Ankara was considering international legal means to combat the bill.
If the bill is adopted, "our ties will receive irreparable wounds in politics, economics and security," Gul said, describing the draft as a violation of freedom of expression, a basic tenet of the European Union.
"The government will use all means provided by international law, including resorting to judiciary means," Gul said.
Analysts have said Turkey could challenge the French bill at the European Court of Human Rights after it has been adopted.
The bill is widely seen here as a punch below the belt by opponents of Turkey's European Union membership that will fan anti-Western sentiment among Turks and make it harder for the government to push ahead with painful EU-demanded reforms.
"France has made a definite decision to block Turkey's full membership in the European Union," said Sukru Elekdag, a senior MP from the main opposition Republican People's Party (CHP). "France's aim is to frustrate Turkey, to force it to throw in the towel."
Ankara, facing mounting EU warnings to respect freedom of speech, charges that the French move is an example of double standards, arguing that the bill eventually could block free debate on a historical subject.
Ankara had warned ahead of the vote that French companies would be barred from major economic projects in Turkey, including a nuclear power plant whose tender process is expected to soon begin, if the bill was adopted.
Officials, however, have sought to calm widespread calls for a boycott of French goods on the grounds that French companies based in Turkey and employing Turks could be harmed.
The killings are one of the most controversial episodes in Turkish history.
Armenians claim up to 1.5 million of their kin were slaughtered in orchestrated killings between 1915 and 1917.
Turkey categorically rejects the genocide label, arguing that 300,000 Armenians and at least as many Turks died in civil strife when Armenians rose for independence in eastern Anatolia and sided with invading Russian troops as the Ottoman Empire was falling apart.

Copyright AFP (Agence France-Presse), 2006