Some of the angriest protests have been in Tehran

Hamshahri says it wants to test the boundaries of free speech, echoing the reasons European papers gave for publishing the caricatures.

There have been protests about the images across the Muslim world, where they are seen as insulting and racist.

One showed Muhammad, whose image is banned in Islam, as a terrorist bomber.

"Does the West's freedom of expression extend to... an event such as the Holocaust or is this freedom of expression only for the desecration of the sanctities of divine religions?" the best-selling paper said in its announcement.

It also asks for cartoons covering "America and Israel's crimes and plundering".

Iran's conservative rulers are supportive of so-called Holocaust revisionist historians, who argue that the systematic slaughter of Jews by Nazi Germany during World War II has been exaggerated for political ends.

Hitler formula

Graphics editor Farid Mortazavi, who announced the contest, challenged Western newspapers to publish the Iranian cartoons as they did the European ones.

As the row has escalated, Tehran has cut trade ties with Denmark because of the cartoons, first published there last September by the conservative Jyllands-Posten newspaper, and recalled its ambassador in Copenhagen.

Hamshahri is offering gold coins to the best 12 artists - the same number of cartoons that were commissioned by Jyllands-Posten.

It claims to be "keeping its distance from vindictive or irrational conduct" and says full details will be published on 13 February.

The dean of the Simon Wiesenthal Centre, a Jewish human rights and educational organisation, condemned the competition.

"They're following the classic formula of Adolf Hitler, which says if there's a problem, it's the fault of the Jews," said Rabbi Marvin Hier in an interview with AFP.