Israeli Prime Minister Benjamin Netanyahu has issued a stark warning to Iran, saying his nation was prepared to go to war if the Iranians continue to test Israeli red lines in Syria.

Brandishing what he said was a fragment of an Iranian drone shot down over Israeli territory last week, Netanyahu said Iran was trying to "colonise" Syria with a permanent military base and use the war-ravaged nation as a launch pad for operations in Israel.

"Israel will not allow Iran's regime to put the noose of terror around our neck," he said. "We will act without hesitation to defend ourselves. And we will act, if necessary, not only against Iranian proxies that are attacking us but against Iran itself."

The warning came at the Munich Security Conference, the world's most prominent gathering of its type. The sabre-rattling address was followed with a speech by Iranian Foreign Minister Mohammad Javad Zarif.

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"Mr Zarif, do you recognise it?" Netanyahu asked as he held the drone fragment aloft. "You should. It's yours. You can take back with you a message to the tyrants of Tehran: Do not test Israel's resolve."

In his own speech, Zarif dismissed Netanyahu's address as a "cartoonish circus". He cited "almost daily incursions into Syrian airspace" by Israeli aircraft, its strikes against targets in Lebanon and its occupation of Palestinian lands. "Israel uses aggression as a policy against its neighbours," he said.

Zarif suggested Netanyahu was deliberately raising tensions as a way to distract from his troubles at home.

Netanyahu has for years been making dire predictions about the potential for war with Iran.

But Netanyahu is weakened domestically, with police investigators recommending he should be charged with corruption. Last weekend Israel shot down an Iranian drone that had crossed into its airspace. Israel then carried out airstrikes in Syria in retaliation for the incursion, but one of its F-16 fighter jets crashed while under fire.