As the Islamic republic and six world powers started a new round of talks in New York on the Iranian nuclear programme, Netanyahu said "respected commentators in the West" were counselling a softer approach to enlist Tehran in an alliance against Islamic State militants.
"They are fighting the IS out of their own interest," his office quoted him as telling an audience in Jerusalem.
"They are struggling over who will be leader of the Islamist world which they seek to impose on the whole world," he said, referring to Iran.
Iran and the six powers -- Britain, China, France, Russia and the United States plus Germany -- are meeting at United Nations headquarters on the sidelines of the General Assembly.
Israel has refused to rule out military action against Iranian nuclear facilities to prevent any possibility of it developing the technology for an atomic bomb.