He hinted that the West might have to resort to force. The Prime Minister said western allies would meet in the next few days to decide how to react after President Mahmoud Ahmedinejad called for Israel to be "wiped off the map".

While the initial response is likely to be an intensification of diplomatic pressure, senior British officials did not rule out the possibility that they could resort to force if Iran continued on its path of radical confrontation.

Speaking at a European summit at Hampton Court, west London, a visibly angry Mr Blair said Iran would be making "a very big mistake" if it believed western leaders were too preoccupied with other issues to deliver a strong response.

Western frustration with Iran has been building up for months, particularly over Teheran's nuclear programme, its support for Palestinian radicals and suspicions that it has passed bomb-making technology to Iraqi insurgents who have killed at least eight British servicemen this year.

Mr Blair's patience finally snapped after hearing Mr Ahmadinejad's harangue at a Teheran conference entitled "The World Without Zionism", at which he declared: "The establishment of the Zionist regime was a move by the world oppressor against the Islamic world.

"As the Imam [the late Ayatollah Khomeini] said, 'Israel must be wiped off the map' … The Islamic world will not let its historic enemy live in its heartland."

The Prime Minister said: "These sentiments are completely and totally unacceptable. I have never come across a situation where the president of a country says they want to wipe out another country - this is not acceptable. Their attitude towards terrorism, towards the nuclear weapons and towards Israel is not acceptable.

"If they continue down this path, people are going to believe that they are a real threat to our world security and stability."

Mr Blair said he felt a "real sense of revulsion" at the remarks.

Alluding to fears that after the war in Iraq the US and Britain could turn to Iran, he said: "I have been answering questions on Iran with everyone saying to me, 'Tell us you are not going to do anything about Iran'. If they carry on like this the question people will be asking is, 'When are you going to something about it?' "

Asked whether Mr Blair was making a veiled threat of military action, a senior government source replied: "The prime minister didn't use the 'M' word - but he is making clear that we have to think about these things very seriously indeed." Earlier in the day, Mr Blair interrupted the EU summit so that fellow leaders could issue a joint condemnation.

"Calls for violence, and for the destruction of any state, are manifestly inconsistent with any claim to be a mature and responsible member of the international community," they said.

"Such comments will cause concern about Iran's role in the region, and its future intentions."

The statement came on the same day as a suicide bomber from Islamic Jihad, the Palestinian radical faction supported by Iran, killed five Israelis and wounded at least 28 others in the town of Hadera.

Similar condemnation echoed around the western world.

Israel's prime minister, Ariel Sharon, demanded that Iran be expelled from the United Nations. But Arab states, including Jordan and Egypt who have made peace with Israel, kept silent.

A telling response came from Moscow, which suggested it may no longer be able halt western attempts to report Iran to the United Nations Security Council over fears that Teheran is secretly trying to build nuclear weapons.

"I have to admit that those who insist on transferring the Iranian nuclear dossier to the United Nations Security Council have received an additional argument to do so," said the Russian foreign minister, Sergei Lavrov, during a trip to Jordan.