The city centre compound, dubbed the "Den of Spies" and dressed in anti-US murals, was seized after the 1979 Islamic revolution toppled the Washington-backed shah Mohammad Reza Pahlavi.

"These are unforgettable memories. The US embassy was a safe haven for the US and its allies who wanted to topple the revolution," said Mohammad Baqer Shariatpanah, a 58-year-old cleric who had joined those holding the hostages after the revolution.

"The Islamic values of the time are still alive and there is no doubt the US is still Iran's main enemy," said the cleric, who takes part in the rally every year.

Fifty-two Americans were held captive for 444 days -- a drama which led to the severing of diplomatic ties in 1980 -- and the anniversary of the takeover is marked every year by regime-organised events for young students invited to condemn the "Great Satan".

This year's demonstration saw thousands of teenage boys and girls, who have been given a day off school, gather outside the compound. Many were wearing camouflage vests and waving religious banners.

Despite the relaxed carnival atmosphere, one teacher insisted the event was more than just a holiday outing.

"They are fully aware of the importance of this day. They are fully aware of our legitimate right to nuclear technology," said Ismail Shajari, a 34-year-old west Tehran teacher who had come with 60 pupils.

Tensions over Iran's disputed nuclear programme are running high, and the rally was yet another opportunity for the hardline clerical regime to spell out its refusal to heed Western calls for it to abandon sensitive nuclear fuel technology.

Relations with the United States are also still has bad as ever, with President George W. Bush having lumped Iran into his "axis of evil".

"We students are proud to have given so many martyrs to the revolution. We are also proud that after 26 years of revolution we have reached the highest level of technology thanks to the expertise of our nuclear scientists," a declaration from the students said.

"Nuclear technology is our legitimate right. All Iranian officials must safeguard this technology and not give in to the ruling of the International Atomic Energy Agency (IAEA)," the statement said.

In August, Iran rejected an EU offer of trade and other incentives in exchange for a cessation of fuel work and resumed uranium conversion, a precursor to enrichment.

The move led to a breakdown in talks with Britain, France and Germany, and prompted the IAEA to find Iran in "non-compliance" with the nuclear Non-Proliferation Treaty (NPT) -- a resolution that could pave the way for Iran to be referred to the UN Security Council.

The UN watchdog will next discuss Iran on November 24.

The demonstrators also voiced support for their hardline President Mahmoud Ahmadinejad, who sparked an international outcry after calling last week for Israel to be "wiped off the map".

His comment has drawn widespread condemnation, including a statement from the Security Council.

"We fully support the declarations of our president. We advise the world oppressors not to make the same mistake as they made in Tabas," said the students' statement.

Tabas is a town in the central Iranian desert where a US mission to rescue its hostages failed due to a sandstorm and helicopter crash. The debacle contributed to the defeat of then-US president Jimmy Carter.

The rally also featured flag burning, effigies of US President George W. Bush, Israeli Prime Minister Ariel Sharon and British Prime Minister Tony Blair as well as banners reading "Bush go to hell!".

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