Azerbaijan on Wednesday dismissed an Iranian protest over its reported deal to buy arms worth $1.5 billion from Tehran's foe Israel amid increased tensions between the neighbouring states.

Azerbaijan's ambassador was summoned to Iran's foreign ministry on Tuesday to explain the weapons and to receive a warning that Israel must not be permitted to use Azerbaijan to stage "terrorist acts" against Iran.

But the Azerbaijani foreign ministry said that the reported weapons purchases -- which it did not confirm -- were not intended to threaten Iran.

"Our foreign policy is not directed against anyone else," foreign ministry spokesman Elman Abdullayev told a news conference.

Iranian news agencies reported Tuesday that Azerbaijan's ambassador to Tehran, Javanshir Akhundov, had acknowledged the arms deal.

Akhundov explained that the weapons were bought "to liberate occupied Azerbaijani land", according to the reports -- a reference to the disputed region of Nagorny Karabakh which was seized from Azerbaijan by Armenian forces during a war in the 1990s.

The foreign ministry also cited the continuing conflict with neighbour Armenia over Karabakh, where no peace deal has been signed despite years of negotiations since the 1994 ceasefire.

"Azerbaijani lands are under occupation and we have one million refugees and internally displaced people, so we will do everything to restore territorial integrity and return our lands," Abdullayev said.

The arms deal row came a week after police in Azerbaijan said they arrested an unspecified number of people linked to Iran and to the Lebanese militant group Hezbollah on suspicion of planning attacks in the country.

Iran this month also accused Azerbaijan, which is mainly Muslim, of working with Israel's spy services and helping assassins who murdered Iranian nuclear scientists in recent years -- a claim rejected by Baku as "slander".

Relations between Tehran and Baku have been tense for several months, with Azerbaijan saying in January that it had detained two other people allegedly linked to Iranian intelligence on suspicion of plotting attacks.