Mr Netanyahu made the extraordinary assertion at the UN General Assembly in New York on Thursday, where he claimed Iran possessed a “secret warehouse”.
Tehran has responded to the inflammatory remarks in a fiery riposte as tensions between the Middle Eastern nations hit fever pitch.
Iranian Foreign Minister Java Zarif wrote in a blistering tweet: “No arts and craft show will ever obfuscate that Israel is the only regime in our region with a secret and undeclared nuclear weapons program — including an actual atomic arsenal.
“Time for Israel to fess up and open its illegal nuclear weapons programme to international inspectors.”
The senior Iranian politician’s stern rebuttal comes after US President Donald Trump withdrew from a historic nuclear deal struck between Iran, China, Russia the UK, France and the US.
The deal, known as the Joint Comprehensive Plan of Action, was intended to curb Iran’s nuclear energy programme, which the West maintained was a cover-up for the development of a nuclear bomb.
Mr Netanyahu has now railed against Iran, claiming Tehran is still developing the very weapons the nuclear deal was designed to eradicate.
Mr Netanyahu asked at the General Assembly in New York: “Why did Iran keep a secret atomic archive, and a secret atomic warehouse?”
The Israeli commander-in-chief then held up a poster of the supposed location of Iran’s “secret atomic warehouse”.
He said: “Today I am disclosing for the first time that Iran has another secret facility in Tehran.
“A secret atomic warehouse for storing massive amounts of equipment and material for Iran’s secret nuclear weapons program.”
Mr Netanyahu’s claims threaten to inflame tensions between Tel Aviv and Tehran as the already febrile political situation in the region deteriorates.
In an ominous warning, Mr Netanyahu said: “What Iran hides, Israel will find.
“Once and for all, tell the world the truth about Iran.
“Israel will do whatever it must do to defend against Iran’s aggression.”
Mr Netanyahu also noted Israel would act against Iran in Syria, Lebanon and even Iraq, “wherever” is needed “to defend our state and our people”.
The heated rhetoric could lead to a prolonged conflict in the precarious region as a peaceful resolution looks increasingly doubtful.