"We believe that the country of Palestine belongs in its entirety to the Palestinians," he said at the mausoleum of Ayatollah Ruhollah Khomeini on the 22nd anniversary of the revolutionary leader's death.

"Palestine is inseparable and it belongs to the Palestinians undivided," Khamenei, who has the final say in Iran's politics, said, adding "Palestine will return to the arms of Islam, without any doubt."

Iran has not recognised Israel since the 1979 Islamic revolution and backs Palestinian and Lebanese militant groups fighting against the Jewish state.

It also does not support the creation of a Palestinian nation alongside the Jewish state.

US President Barack Obama said in a speech in mid-May that the borders of Israel and Palestine "should be based on the 1967 lines with mutually agreed swaps, so that secure and recognised borders are established for both states."

Palestinian president Mahmud Abbas has threatened to seek UN recognition as a full member country for the territories under his jurisdiction in September if peace talks do not resume.

"The American solution will not succeed," Khamenei told hundreds of thousands of people gathered in and around the mausoleum.

"The solution is that the people of Palestine should take part in a referendum and whatever regime they vote for, should govern.

"It is this regime which has come to power through the Palestinian people's vote will decide how to deal with the Zionist who came from abroad," Khamenei said.

On Friday Iranian President Mahmoud Ahmadinejad said: "as long as the Zionist regime exists, if only on a small piece of land in Palestine, the region will not see tranquillity."

Ahmadinejad's vitriolic attacks on the Jewish state and his dismissal of the Holocaust as a "myth" has drawn international condemnation.

Copyright AFP (Agence France-Presse), 2011