The president declared Iran a nuclear power last week after he said it had successfully enriched uranium to the level used in power stations. Iran insists its program is civilian despite accusations by the West that it wants atomic bombs.

The United States has said it wants a diplomatic solution to the standoff but has not ruled out a military option.

"Today, Iran's army is one of the most powerful armies in the world and it will powerfully defend the country's political borders and the nation," Ahmadinejad said in a brief speech before troops and small missiles were paraded past.

"It will cut off the hands of any aggressors and will make any aggressor regret it," he added.

Ahmadinejad took the salute of thousands of army, navy and air force troops goose-stepping passed. Tanks were towed passed on large trucks and helicopters flew in formation overhead. Parachutists trailing ribbons sailed down from the sky.

Iran staged war games in the Gulf earlier this month and during the maneuvers tested what it said was a radar-evading missile, a high-speed sonar-evading torpedo and other equipment it said the country had developed.

Analysts say much of Iran's military equipment is outdated but say Iranian forces could still disrupt key oil shipping routes in the Gulf if pushed, the message they said the maneuvers were intended to send.

Tuesday's parade was held opposite the tomb of Ayatollah Ruhollah Khomeini, the founder of the Islamic state. Nearby are tens of thousands of war graves of those who died in the bloody 1980-1988 Iran- Iraq war.

Members of the volunteer Basij militia, who see themselves as the guardians of revolutionary values, also paraded past, wearing head bands with the words "Mohammad, God's prophet."