Israeli Prime Minister Benjamin Netanyahu said his country is not bound by the historic nuclear accord struck by Iran and key world powers, describing the deal as a "historic mistake" and warning that he is ready to order military action.

Netanyahu made his harshest criticism yet of the agreement reached in Vienna, Austria, after telling for months now that such a deal will not keep Iran from obtaining nuclear weapons they could use against Israel, the Daily Mail wrote.

"Israel is not bound by this deal with Iran because Iran continues to seek our destruction," he said before a meeting of his security cabinet, who turned down the accord.

"We will always defend ourselves," Netanyahu stressed.

The prime minister argued that removing economic sanctions on Iran would allow the country to further support proxy militants and increase instability in the oil-rich region.

In return for the lifting of such sanctions, which have crippled the economy of Iran, strict limits will be placed on the country's nuclear activities for more than 10 years. World powers hope this will prevent an arms race.

While analysts say unilateral military action by Israel looks unlikely for now, the Israeli government is keeping the option on the table.

"We did commit to preventing Iran from acquiring nuclear weapons, and this commitment still stands," said Netanyahu before the official announcement of the agreement.

The prime minister earlier brought his campaign against the deal to the US Congress and the UN General Assembly but failed to block the agreement.

US President Barack Obama tried to reassure Netanyahu on Tuesday, telling him via a phone call that the agreement was in Israel's "national security interest." Netanyahu, however, stood his ground.

US Defence Secretary Ashton Carter is set to visit Israel next week.

Former Israeli Prime Minister Ehud Barak echoed Netanyahu's sentiment about the deal, saying it "allows Iran to turn into a threshold nuclear power. It allows Iran to choose the time to break through and become a real nuclear power."

He also said that the accord allows Iran to keep on sponsoring terror.