Demonstrators burn an Israeli flag during Jerusalem Day demonstration in Tehran October 20, 2006.[Reuters]

Lt. Gen. Dan Halutz spoke a day after Prime Minister Ehud Olmert warned Tehran it would have a "price to pay" if it refused to back down from its nuclear ambitions _ the strongest words used by an Israeli leader about the Iranian threat.

"This combination of nuclear weapons and an extreme regime which has the clear goal of destroying Israel is a combination to which we cannot remain indifferent," Halutz told business leaders on Friday.

Israel and the United States accuse Iran of trying to build nuclear weapons, but Tehran insists its nuclear program is for peaceful purposes. Despite intense international pressure and the looming threat of U.N. Security Council sanctions, Iran has refused to freeze uranium enrichment or meet other international demands.

Israel has long said that a nuclear Iran would be an existential threat. Israel's warnings have increased in intensity since hard-line Iranian leader Mahmoud Ahmadinejad took power. Ahmadinejad has called for Israel to be "wiped off the map" and questioned the truth of the Holocaust.

Until now, Israel has said it would not take the lead in the struggle to halt Iran's nuclear ambitions. It says the international community, led by the U.S., should confront Iran and says it is hopeful for a diplomatic solution. Israel has never said whether it would take military action to halt Iran in its nuclear race should diplomatic efforts fail.

In a daring military mission in 1981, Israeli warplanes destroyed an unfinished Iraqi nuclear reactor, preventing Saddam Hussein from achieving his nuclear goals.