Mahmoud Ahmadinejad's camp has claimed victory in Iran's presidential election after the latest official results showed him defeating his moderate rival by a wide margin.

"According to the votes counted so far, the distance between Ahmadinejad and his rivals is so great that any doubts cast on this victory will be treated as a joke by the public," said his campaign manager, Mojtaba Samareh Hachemi, in comments to the Fars news agency.

Ahmadinejad is leading by 65 per cent against almost 32 per cent for his moderate rival Mir Hossein Mousavi, with 77 per cent of ballot boxes counted, according to election commission chief Kamran Daneshjoo.

"With the number of ballot boxes left I think the level of participation will be more than 35 million, in other words between 75 per cent to 80 per cent participation," he said.

As it became clear that the reformist Mousavi's bid to halt Ahmadinejad's drive for a second term at the helm of the Islamic republic was faltering, the president's supporters began pouring onto the streets of Tehran, honking their horns and waving Iranian flags.

Mousavi, whose supporters had earned the nickname 'the greens' because in recent weeks they had flooded the streets wearing green items of clothing, was loudly mocked.

"Where are the greens? - in a mousehole," Ahmadinejad's supporters chanted. "It is a Saturday and Mousavi is disgraced."

Sandwich seller Kamra Mohammadi, 22, was ecstatic at Ahmadinejad's success.

"I am happy that my candidate has won - he helps the poor and he catches the thieves," he said smiling broadly.

Mousavi had earlier claimed for himself an overwhelming victory in Iran's most hotly contested election since the Islamic revolution 30 years ago.

"In line with the information we have received, I am the winner of this election by a substantial margin," he told a news conference in Tehran.

Only minutes earlier, close Mousavi aide Ali Akbar Mohatshemi-Pour said his candidate had won 65 per cent of the vote.

State news agency IRNA, however, announced that Ahmadinejad had won re-election.

"Doctor Ahmadinejad, by getting a majority of the votes, has become the definite winner of the 10th presidential election," it said.

Iran's economic woes and its relationship with the outside world emerged as key issues during a feisty campaign marked by carnival-like street rallies and acrimonious candidate debates on prime-time television.

The election turned the spotlight on deep divisions in Iran after four years under Ahmadinejad, whose firebrand rhetoric further isolated the country from the West while at home he has come under fire over his economic policies.

Ahmadinejad, 52, is seeking a second four-year term, while the 67-year-old Mousavi is hoping to make a comeback after two decades in the political wilderness, pledging better ties with the outside world.

Young men and women in big cities are throwing their weight behind Mousavi while Ahmadinejad, who is pledging to help the poor and stamp out corruption, draws passionate support from rural towns and villages.

AFP