"Unless their programme experiences technical problems, the Iranians will have by 2014 a bomb ready to be used, which would represent a concrete threat for Israel," said Meir Dagan.
"This threat must be removed," he told parliament's foreign affairs and defence committee.
He acknowledged that maintaining international sanctions against Iran could lead to a halt of Tehran's nuclear programme.
Foreign Minister Avigdor Lieberman, meanwhile, said Israel expected the international community to take measures against Iran similar to those imposed against North Korea.
Israel, the region's sole if undeclared nuclear-armed state, believes Iran is trying to develop atomic weapons under the guise of a peaceful nuclear programme, a charge Tehran has vehemently denied.