* Ahmadinejad rejects U.S.-backed peace talks
* Calls on Palestinians to fight on against Israel
* State TV says millions rally on Al-Quds day (Adds Hezbollah leader comment paragraphs 8-9)
By Parisa Hafezi
TEHRAN, Sept 3 (Reuters) - Iranian President Mahmoud Ahmadinejad urged Palestinians to keep up their armed struggle against Israel a day after Israeli and Palestinian leaders agreed to continue talks on a U.S.-backed peace deal.
U.S. Secretary of State Hillary Clinton, who hosted the first session of talks between Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas in Washington, voiced confidence that this latest attempt to bring peace to the region could succeed where so many others have failed.
Ahmadinejad said that the talks, seeking to end a conflict that has boiled for six decades, would once again fail. He criticised some Muslim leaders for not providing all-out support to the Palestinians in their revolt against Israel.
“Palestine’s issue cannot be resolved through talks with the enemies of the Palestinian nation. Resisting is the only way to rescue the Palestinians,” Ahmadinejad told worshippers at Tehran University in a live broadcast to mark the annual Al-Quds (Jerusalem) Day in the Islamic Republic.
“How can these talks succeed when the mediators are those who created this conflict,” he added. Netanyahu and Abbas have agreed to meet again on Sept. 14-15 with Clinton also present.
In Gaza, whose Islamist rulers are backed by Iran, several thousand Hamas and Islamic Jihad supporters rallied to mark Jerusalem Day and condemn the peace negotiations. They waved portraits of the late Ayatollah Khomeini and Iranian flags.
“Jerusalem cannot be liberated through negotiations or dialogue ... resistance and Jihad is the only way to liberate Jerusalem from the dirt of the Zionist occupation,” said senior Hamas figure Ismail Al-Ashqar.
The leader of Lebanon’s Iranian-backed militant group Hezbollah, Sayyed Hassan Nasrallah, described the Israeli-Palestinian talks as “still-born”, adding that most Palestinian factions had rejected them.
“The last thing that these negotiations are concerned with is... Palestine and the rights of the Palestinian people,” Nasrallah said in a televised speech, adding that the talks would just give more “life and legitimacy” to Israel.
Al-Quds day was launched by Iran’s 1979 Islamic revolution founder Ayatollah Ruhollah Khomeini. It is held on the last Friday of the Muslim holy fasting month of Ramadan.
Iran’s state television said millions marched in a nationwide rally, including soldiers, students and clerics.
Black-clad women with small children clutching balloons emblazoned “Death to Israel” were among those crowding the streets of central Tehran.
Iran does not recognise Israel and has repeatedly called for the destruction of the Jewish state as the only solution to the conflict in the Middle East. It backs Lebanon’s Hezbollah, Palestinian Hamas and Islamic Jihad militant groups in their fight against Israel.
“The nations of the region are able to eliminate the Zionist regime from the face of the earth,” said Ahmadinejad, adding the Israeli “regime has no future. Its life has come to an end”.
Washington accuses Iran of sponsoring terrorism by arming and financing those organisations. Iran says it provides moral support to the Islamist militant groups.
Iran is also at odds with Washington and its European allies over its nuclear activities, which the West fears is aimed at building bombs. Iran denies this.
Israel, believed to be the only nuclear-armed country in the Middle East, regards Iran’s nuclear programme as a threat to its existence and has not ruled out military action if diplomacy fails to end the row. International sanctions have been imposed on Iran to pressure Tehran to halt its sensitive nuclear work.
Ahmadinejad told Israel the Islamic Republic would not remain idle in the face of any military attack.
“I want to say that not only the Zionists, but even their masters are smaller than to lay a finger on the Iranian nation and its rights,” said Ahmadinejad. Iran’s top military official echoed the president’s comments.
“Our developed weapons can hit any part of the Zionist regime (Israel) ... We hope not to be forced to attack their nuclear facility,” armed forces chief of staff Hassan Firouzabadi told the semi-official Mehr news agency on Friday.
Pro-government hardliners surrounded the house of Iranian opposition leader Mehdi Karoubi to prevent him attending the rally, fearing his presence could revive anti-government protests that jolted Iran following last year’s presidential vote, his website Saham news said. (Additional reporting by Hossein Jaseb and Ramin Mostafavi in Tehran, Laila Bassam in Beirut; Writing by Parisa Hafezi; Editing by Samia Nakhoul and Noah Barkin)