Ahmadinejad went on television to declare the election a "great victory," even as baton-wielding police were clashing with protestors in the streets of the capital in unrest not seen since student riots a decade ago.

Thousands of supporters of Mousavi swept through Tehran shouting "Down with the Dictator" after final results showed Ahmadinejad winning almost 63 percent of the vote.

The moderate ex-premier Mousavi, who earlier in the day had cried foul over election irregularities and warned the outcome of the vote could lead to "tyranny," late Saturday issued a call for calm.

"The violations in the election are very serious and you are right to be deeply hurt," he told his supporters in a statement posted on his campaign website.

"But I firmly call on you not to subject any individual or groups to hurt. Do not lose your calm and restraint. Everybody should draw a line between themselves and any violent behaviour," Mousavi said.

Ahmadinejad in his television address rejected allegations the vote was rigged.

"The election was completely free... and it is a great victory," he said, calling on his supporters to gather on Sunday at 5:00 pm (1230 GMT) in the capital's Vali Asr Square, where many of Saturday's clashes occurred.

Even as he was speaking, Iran's main cellular phone network was cut while social networking site Facebook was also blocked.

The interior minister said Mousavi had won less than 34 percent of the vote, giving Ahmadinejad another four-year term in a result that dashed Western hopes of change and set the scene for a possible domestic power struggle.

Iran's all-powerful supreme leader Ayatollah Ali Khamenei hailed Ahmadinejad's victory and urged the country to unite behind him after the most heated election campaign since the Islamic revolution in 1979.

The vote outcome appears to have galvanised a grass-roots movement for change after 30 years of restrictive clerical rule in a country where 60 percent of the population was born after the revolution.

The international community had also been keenly watching the election for any signs of a shift in policy after four years of hardline rhetoric from the 52-year-old Ahmadinejad and a standoff over Iran's nuclear drive.

Mousavi protested at what he described as "numerous and blatant irregularities" in the vote which officials said attracted a record turnout of around 85 percent of the 46 million electorate.

"No one can imagine such rigging, with the world watching, from a government who holds commitment to shariah-based justice as one of its basic pillars," said Mousavi said in a letter posted on his campaign website.

"What we have seen from dishonest (election) officials will result in shaking the pillars of the Islamic republic system, and a dominance of lying and tyranny," he said in a separate statement.

In the heart of Tehran, Mousavi's supporters voiced their disbelief and frustration at the results, with some throwing stones at police who struck back with batons.

Angry crowds first emerged near Mousavi's campaign office in central Tehran, where protestors, including women, were hit with sticks as riot police on motorbikes moved in to break up the gathering, an AFP correspondent said.

Late Saturday police further beefed up their presence in main streets and squares, especially in the area housing Mousavi's office, while dozens of men were seen handcuffed and detained in an interior ministry compound.

Members of Iran's volunteer Basij militia were also being deployed in some parts of the city while several smouldering garbage cans were seen lying on the sidewalks after being set ablaze by rioters.

The White House said Saturday it was monitoring the reports of irregularities, while British Foreign Secretary David Miliband said London "will continue to follow developments" in Iran.

The European Union said it was "concerned about alleged irregularities during the election process and post-election violence..."

In Moscow, the chairman of the Duma (parliament) Committee on International Affairs Konstantin Kosachev hoped for more "understanding and wisdom" from Ahmadinejad in the new term.

"The results of the election show, now more than ever, how much stronger the Iranian threat has become," said arch-foe Israel's deputy foreign minister Danny Ayalon.

The election highlighted deep divisions in Iran after four years under Ahmadinejad, who had massive support in the rural heartland, while in the big cities young men and women threw their weight behind Mousavi.

earlier related report
Iranian elections deal blow to Obama's hopes for dialogue
The reelection of Iran's hardline incumbent President Mahmoud Ahmadinejad dealt a swift blow to President Barack Obama's efforts to overturn decades of hostility between Washington and Tehran.

Ahmadinejad's declared landslide win, which triggered riots by opposition supporters and furious complaints of cheating from his defeated rivals, will also complicate international efforts to halt Tehran's nuclear ambitions, experts said.

Although Obama has said his outreach to arch-foe Iran does not depend on its leaders, he will have to deal with a man who has been hostile to the United States, intransigent on his controversial nuclear program and vowed to "wipe out" top US ally Israel.

Obama's young administration now faces a gamble: join the chorus of Ahmadinejad's rivals who say votes were rigged and face criticism over interfering in Iran's internal affairs, or contain its indignation and face the criticism of rights advocates.

The outcome of the presidential election also spells the possibility of an escalation of violence in the Middle East, warned Karim Sadjapour of the Carnegie Endowment for International Peace.

"The process of some type of military strike on Iran, an Israeli military strike on Iran, increases significantly if Ahmadinejad remains president," he said.

The White House's initial reaction, a brief statement by spokesman Robert Gibbs, reflected the delicate balance Obama now faces.

The United States is "impressed by the vigorous debate and enthusiasm that this election generated" and continues "to monitor the entire situation closely, including reports of irregularities," Gibbs said.

Obama has made a clean break with the approach of his predecessor, George W. Bush, opting instead for a firm yet direct dialogue with the Islamic republic.

On Friday, Obama again reiterated that he would seek engagement with "whoever ends up winning the election in Iran."

But Obama's administration is "in a bind," according to former State Department policy advisor Suzanne Maloney.

"They have to deal with the Iranian power structure that exists" on key matters such as Tehran's nuclear program, Afghanistan, Iraq and oil, she said.

"It will make any further negotiating process much more difficult, it will make the effort of building public support for engagement much more difficult."

Maloney joined other experts in doubting the legitimacy of the results announced by Iranian officials.

Should street violence in Iran escalate, "the Obama administration is going to come under great pressure to actively promote a democracy agenda and to side explicitly with the people of Iran," she said.

"That's not a position that the administration wants to be in because it would kill any prospect of diplomacy."

But Obama will likely continue his efforts, having said he wants to see serious progress on his diplomatic outreach by the end of the year, albeit after a possible pause of several weeks to allow the dust to settle in Iran.

In his second term, experts said Ahmadinejad may show more willingness to negotiate on his country's nuclear program, which Western powers suspect of concealing efforts to build atomic weapons, a charge Tehran vehemently denies.

But non-proliferation expert Joseph Cirincione said the Iranian president may approach those negotiations bolstered by his election victory.

"The good news is that Ahmadinejad has got his negotiating team in place and is ready to engage the Obama administration immediately," he said. "The bad news is that he is going to come back with a hard line and not be in the mood to compromise."

Since Iranian policy is set by supreme leader Ayatollah Ali Khamenei and not the president, "there is some possibility that, seeing the results and the turmoil inside Iran, the leadership might be looking for a compromise to reset Iranian foreign policy with the West," Cirincione said.

Events leading up to Friday's vote, which saw throngs of mostly young supporters of moderate ex-premier Mir Hossein Mousavi take to the streets, may have confirmed Khamenei's long-standing fears about a velvet revolution provoked by foreigners to topple his regime, said analyst Patrick Clawson.

"These events of the last two weeks will have persuaded Khamenei that he has been right for 20 years in saying that the real danger is a velvet revolution, and that the West is behind it, and that therefore there is no point in doing a deal with the West over the nuclear matter," Clawson said.

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