"As the Nazis sought to stamp out civilisation and to set the master race to rule across the earth... while wiping out the Jewish people, so does Iran seek to control the region, spread outwards and destroy the Jewish state," he said.
Speaking at Jerusalem's Yad Vashem Holocaust memorial, as Israel began marking the liberation of the Nazi death camps 70 years ago, he used the occasion to keep up his constant pressure against the emerging nuclear agreement between Tehran and world powers.
World powers agreed with Iran this month on the framework of a deal to rein in its nuclear programme in exchange for the lifting of international sanctions.
Israel and many Western governments suspect Iran's civilian nuclear programme is a front for efforts to build a military capability, a charge Tehran denies.
Warning against appeasing "tyrannical regimes," he questioned whether the lessons of World War II had been fully absorbed.
"Has the world really learned from the incomprehensible universal and Jewish tragedy of the previous century," he asked.
"The bad agreement being drafted with Iran teaches us that the historic lesson has not been internalised."
"The powers turn a deaf ear to the crowds in Iran shouting 'Death to America; death to Israel,'" Netanyahu said.
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"The democratic governments made a momentous mistake before World War Two and we, along with many of our neighbours, are convinced that a bitter mistake has also been made now."
Last week, Netanyahu demanded that Iran "stop its threats to annihilate Israel."
President Reuven Rivlin, born in British-ruled Palestine in 1939, recalled his first sight of the human remnants of the camps.
"I remember the first of the survivors who arrived in Jerusalem," he told the hushed audience.
"The face and extent of the horror was exposed to us."
National Holocaust day runs until sunset Thursday, with events scheduled throughout the day.
At 0700 GMT sirens will sound across the country, signalling the start of two minutes silence, during which traffic stops and pedestrians stand at attention.
Later there will be ceremonies at Yad Vashem, parliament and elsewhere.
From sunset Wednesday, radio and television stations broadcast programmes on the genocide and play sombre music, while places of entertainment are closed.