Iran's president called the existence of Israel an "insult to human dignity" Friday during annual rallies in support of Muslim claims to the holy city of Jerusalem.

And Mahmoud Ahmadinejad once again said Palestinians should not pay any price because Europeans committed crimes against Jews in the Second World War.

He added that Europe, Canada or the United States could give a part of their own land so that Jews in Israel can establish their country, the state-run Islamic Republic News Agency reported.

"Canada and Alaska have vast lands, why don't you relocate them over there and keep helping them over there with [aid of] 30 to 40 billion dollars per year for building a new existence?" Ahmadinejad said during a Tehran rally to mark Al Quds Day, an annual day of demonstrations by some Muslim communities around the world against Israel's control of Jersalem. ("Al Quds" is the Arabic name for Jerusalem.)

"I ask European governments supporting Zionists and the American people: Will you allow occupation of part of your land under a pretext and then talk about a two-state solution?" Ahmadinejad said after the rallies.

Ahmadinejad said a "free referendum" was the solution to the Palestinian issue, saying Jews, Muslims and Christians as well as five million Palestinian refugees should take part in a vote to determine their own fate.

Ahmadinejad's remarks came as millions of Iranians held rallies across Iran to decry Israel's continued hold on Jerusalem, the city where Muslims believe Islam's prophet Muhammad began his journey to heaven.

"The creation, continued existence and unlimited [Western] support for this regime is an insult to human dignity," Ahmadinejad said. "The occupation of Palestine is not limited to one land. The Zionist issue is now a global issue."

Thousands also marked Al-Quds Day, the idea for which originated in Iran after the country's 1979 revolution, with demonstrations in Syria and Bahrain.

In Tehran, hundreds of thousands of people poured into the streets as they chanted "Death to America" and "Death to Israel." Some protesters also burned U.S. and Israeli flags.

State television reported similar large rallies in all other provincial capitals and smaller towns across Iran.

Iran does not recognize Israel and regards Palestine as comprising the Jewish state as well as the West Bank and Gaza.

Ahmadinejad is known for his Israel-lashing comments. He has also called the Nazi Holocaust a "myth" used as a pretext for carving out a Jewish state in the heart of the Muslim world after the Second World War.