Any plan to divide a Palestinian state would be unacceptable, Iran's supreme leader said on Saturday, adding that such a state could exist temporarily as part of "liberated territory."

Israel's prime minister responded by saying his country would respond to these "hateful" remarks by redoubling its focus on security and its demands that it be recognised as a Jewish state.

"Any plan which would lead to the division of Palestine is unacceptable," Ayatollah Ali Khamenei told an international conference, as the United Nations continues to mull a membership application filed by the Palestinian Authority.

"Any plan that would create two states ... would be accepting a Zionist state in the land of Palestine," Khamenei told the International Conference on Palestine in Tehran.

He again called Israel a "cancerous tumor" and "a permanent threat" to peace in the Middle East, as he often does in speeches on the issue.

"It goes without saying that the Palestinian people, as they did in Gaza, will create a state ... on any liberated Palestinian land," Khamenei said.

"But the ultimate goal is to liberate all of Palestine from the Mediterranean to the Dead Sea."

"We do not propose a conventional war by Islamic countries, throwing the Jews into the sea or arbitration by the UN and other international bodies," but a "referendum by (indigenous) Palestinians" regardless of religion but excluding Jews who have immigrated, Khamenei said.

In August, President Mahmoud Ahmadinejad said the potential recognition of a Palestinian state by the United Nations should only be a "step forward" towards "full liberation."

In response to Khamenei's remarks, Netanyahu said the "hateful declarations of the ayatollahs' regime about the destruction of Israel reinforce our determination to protect the security needs of our citizens and to demand that Israel be recognised as a Jewish state."

"Israel will continue to work for achieving peace, ensuring that the peace and security of its citizens will be guaranteed for generations to come."

On September 23, the UN Security Council took up the request for full recognition of a Palestinian state over the vehement opposition of Israel and the United States.

The Tehran conference is being attended by parliamentarians from some 20 nations and such figures as Khaled Meshaal, exiled chief of the Palestinian Islamist Hamas group, and Ramadan Abdullah, secretary general of Islamic Jihad.