“The European Council condemns unreservedly President Ahmadinejad’s call for the eradication of Israel and his denial of the Holocaust,” the council said during a summit in Brussels.
“The comments are wholly unacceptable and have no place in a civilised political debate,” the European Council said.
President Ahmadinejad unleashed a wave of condemnation from world leaders this week after he described the Holocaust as a myth and called for the state of Israel to be moved far from the Middle East.
European leaders also warned in a draft statement that Mr Ahmadinejad’s statement regarding the Holocaust could be grounds for sanctions against Iran.
The EU leaders urged Iran to “join the international consensus on the need of a two-state solution to the Palestinian-Israeli conflict,” and “support the search for peace between Israel and its neighbors and to end the support for groups which advocate or engage in acts of terrorism”.
Amid a long-running standoff with Tehran over its nuclear program, EU leaders also warned that time was running out for a diplomatic solution.
“The European Council is gravely concerned at Iran’s failure to build confidence that its nuclear program is exclusively peaceful,” EU leaders said at the summit, which focused primarily on the bloc’s budget.
The statement comes ahead of a EU-Iran meeting next Wednesday in Vienna, but European and Western diplomats say there is little hope of progress in getting Tehran to abandon nuclear fuel work that raises concerns over nuclear weapons.
In an escalation of tensions, Iran’s defence minister on Thursday warned that any Israeli attack against it would provoke a “destructive” response.
Iran’s defences are strong enough to thwart any strike, state-run TV quoted the minister, General Mostafa Mohammad Najjar, as saying.
But were Israel to try, “the answer of the Iranian armed forces to any attack would be quick, sharp and destructive,” Mr Najjar added.
Israeli officials and politicians have openly discussed the possibility of an attack on Iran, either alone or with other countries, aimed at crippling Iran’s nuclear development capabilities.
Israel, which is widely believed to possess nuclear weapons, together with the United States accuses Iran of working to build an atomic bomb, but Tehran denies having such plans.
Raanan Gissin, spokesman for Israeli Prime Minister Ariel Sharon, tried to temper talk of a pre-emptive strike, telling The Associated Press that “Israel has no intention of attacking Iran, but Israel will know how to defend itself if anyone threatens its existence.”
Iranian Interior Minister Mostafa Pourmohammadi came to his president’s defence, saying Mr Ahmadinejad’s comments on Israel and the authenticity of the Holocaust had been misunderstood.
Iran’s supreme leader Ayatollah Ali Khamenei, who has final word on all matters, has also stood by his president.