The Iranian claims about sworn enemy Israel come after state television last week showed tanks, howitzers and helicopters firing at targets in the north west of the country.

Israel is a major arms supplier to Azerbaijan, which last autumn won a six-week war with neighbour Armenia over the disputed Nagorno-Karabakh region.

Azerbaijan's foreign ministry spokeswoman Leyla Abdullayeva said Monday that Iran's claims were groundless.

"We reject the allegations of any third party's presence near the Azerbaijani-Iranian border, such allegations are totally baseless," she said.

Azerbaijan's President Ilham Aliyev last week criticised the Iranian war games in an interview with Turkish news agency Anadolu, asking "why now, and why on our border?"

Israel came under diplomatic fire from Armenia during last year's conflict between the Caucasus neighbours.

The fighting ended with a Russian-brokered ceasefire that saw Yerevan cede swathes of contested territories, including the Karabakh section of Azerbaijan's 700-kilometre border with Iran.

Azerbaijan and Iran have long been at loggerheads over Tehran's backing of Armenia in the decades-long Karabakh conflict.

Relations recently soured further after Azerbaijan's army held joint drills with Turkey and Pakistan, 500 kilometres from the country's border with Iran.

Azerbaijan's decision to impose customs duty on Iranian truck drivers transiting to Armenia also fuelled tensions.

Tehran has long been wary of separatist sentiments among ethnic Azerbaijanis, who make up around 10 million of Iran's 83 million people.