Thousands of opposition supporters have clashed with security forces during a government-sponsored rally in Tehran.
Iran’s reformists had been warned not to try to turn the pro-Palestinian Quds (Jerusalem) Day marches into anti-government protests.
Reports say opposition leaders Mir-Hossein Mousavi and former President Mohammad Khatami were attacked.
The opposition has been banned from holding rallies since the disputed presidential election in June.
As part of the Quds Day events, President Mahmoud Ahmadinejad delivered a speech in which he repeated his view that the Nazi Holocaust was a myth.
Tear gas
The Quds Day rallies are held annually on the last Friday of the Muslim fasting month of Ramadan.
The day began peacefully, with thousands of Mr Ahmadinejad’s supporters marching through central Tehran.
But despite warnings by the authorities not to try to hijack the event, protesters shouted slogans in support of Mr Mousavi, a key opponent of the president.
Reports say there were clashes between police and protesters as the march progressed, with some arrests. Stones were thrown, and police used tear gas.
Iranian state-run channel Press TV showed footage of an opposition rally, with many supporters wearing green, the colour adopted by supporters of Mr Mousavi.
Mr Mousavi was forced to leave the rally after his car was attacked, the official Irna news agency reported.
Witnesses said supporters helped Mr Mousavi into his car when hardliners approached and the vehicle sped away as a crowd tried to hold the hardliners back.
Reformist website Parlemennews.ir reported that Mr Khatami was pushed to the ground and his turban knocked off, before police intervened.
In his speech at Tehran University, Mr Ahmadinejad again criticised the creation of Israel.
British Foreign Secretary David Miliband said Mr Ahmadinejad’s denial of the Holocaust was “abhorrent as well as ignorant”.
“It is very important that the world community stands up against this tide of abuse,” Mr Miliband said.
The White House later added to the condemnation, calling Mr Ahmadinejad’s remarks “ignorant and hateful”.
Reporter for BBC Persian, Siavash Ardalan, said it was the first time since Iran’s Islamic Revolution in 1979 that opposition groups had tried to hijack the Quds Day rallies.
For the past 30 years, the sermon on Jerusalem Day has been given by former President Hashemi Rafsanjani.
Analysts say Mr Rafsanjani is normally regarded as a pillar of the Islamic power system, but he quietly sympathises with the opposition.
This year he has been stood down in favour of a hard-line preacher.
Mr Mousavi was defeated by President Ahmadinejad in June’s election, which opposition leaders claim was rigged.
In the aftermath, there was a violent crackdown on anti-government protesters, with a number of deaths and hundreds of people arrested.