Rasmussen extended his lead to over three minutes
The race leader was followed by rivals Alberto Contador and Levi Leipheimer for the whole day, but left them standing on the Col d'Aubisque.
In a day marred by Alexandre Vinokourov's failed dope test, Rasmussen extended his lead to over three minutes ahead of Contador.
Carlos Sastre led for much of the day, but found the last climb too much.
After the overnight news had left the race reeling once again, riders from eight teams, who have formed the Movement for a Credible Cycling, began the day with a protest against doping, delaying the start by 13 minutes.
Once the stage got underway, Stephane Auge, Vincente Garcia-Acosta, Gorka Verdugo and Christophe Rinero made an early break, and established a lead of nearly nine minutes by the time they reached the first climb of Port de Larrau.
Looking to leapfrog Rasmussen at the top of the polka dot jersey competition, Juan Mauricio Soler broke off from the front of the peloton and was joined by sixth-place Sastre and Amets Txurruka.
The trio caught the breakaway on the approach to the second major climb of the day, the Col de la Pierre St-Martin, and with Sastre leading the way, built a lead of almost five minutes by the summit.
Sastre got himself to within two minutes of Rasmussen's overall lead when the Dane's Rabobank team-mates responded at the front of the peloton.
They gradually reeled in the escapees, and by the time the race reached the final, hors category climb of the Col d'Aubisque, it had become a four-way battle between the top-placed riders overall - Rasmussen, Contador, Leipheimer and Cadel Evans.
In an epic mountain duel on the previous stage's finish on the Col de Peyresourde, Contador had relentlessly attacked Rasmussen but here, despite help from team-mate Leipheimer, the Colombian could not wear the Dane down.
And in the final kilometre of a gruelling climb, Rasmussen stood up on his pedals and powered away from his rivals to win the stage and all but seal his grip on the yellow jersey.
Aferwards, Rasmussen admitted that he had used a different strategy to handle Contador's attacks: "On Monday I was finding it tough to follow him," he said.
"So I decided to use a different strategy and go at my tempo," he added. "It worked perfectly because he blew up."
Stage 16 result:
Orthez to Gourette-Col d'Aubisque (218.5km)
1. Michael Rasmussen (Den) Rabobank, 6 hrs, 23 mins, 21 secs
2. Levi Leipheimer (US) Discovery Channel, @ 26 secs
3. Alberto Contador (Spa) Discovery Channel, @ 35 secs
4. Cadel Evans (Aus) Predictor-Lotto, @ 43 secs
5. Juan Mauricio Soler (Col) Barloworld, @ 1 min 25 secs
6. Haimar Zubeldia (Spa) Euskaltel-Euskadi, @ 1 min 52 secs
7. Juan Jose Cobo (Spa) Saunier Duval-Prodir, @ 1 min 54 secs
8. Carlos Sastre (Spa) CSC, @ 2 mins 12 secs
9. Oscar Pereiro (Spa) Caisse d'Epargne, @ 2 mins 27 secs
10. Alejandro Valverde (Spa) Caisse d'Epargne, same time.
Selected others:
25. Charlie Wegelius (GB) Liquigas, @ 7 mins 50 secs
135 Bradley Wiggins (GB) Cofidis @ 41 mins 49 secs
137 Geraint Thomas (GB) Barloworld same time
138 David Millar (GB) Saunier Duval same time
Overall standings:
1. Michael Rasmussen (Den) Rabobank, 76 hrs, 15 mins, 15 secs
2. Alberto Contador (Spa) Discovery Channel, @ 3 mins 10 secs
3. Cadel Evans (Aus) Predictor-Lotto, @ 5 mins 3 secs
4. Levi Leipheimer (US) Discovery Channel, @ 5 mins 59 secs
5. Carlos Sastre (Spa) CSC, @ 9 mins 12 secs
6. Haimar Zubeldia (Spa) Euskaltel-Euskadi, @ 9 mins 39 secs
7. Alejandro Valverde (Spa) Caisse d'Epargne, @ 13 mins 28 secs
8. Kim Kirchen (Lux) T-Mobile, 14 mins 46 secs
9. Yaroslav Popovych (Ukr) Discovery Channel, @ 16 mins
10. Juan Mauricio Soler(Col) Barloworld, @ 16 mins 41 secs.
Selected Others:
48 Charlie Wegelius (GB) Liquigas @ 1 hrs 44 mins 15 secs
76 David Millar (GB) Saunier Duval @ 2 hrs 34 mins 24 secs
131 Bradley Wiggins (GB) Cofidis @ 3 hrs 24 mins 29 secs
148 Geraint Thomas (GB) Barloworld @ 3 hrs 42 mins 7 secs.
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Stage 16 profile
Michael Rasmussen of Denmark has won stage 16 of the 2007 Tour de France in a time of 6h 23' 21".

Rasmussen increased his overall lead by 35" over Alberto Contador of Spain, who finished third.

After a rest day, the riders faced the third-longest, 218.5 km, and arguably the Tour’s hardest, stage. The first challenge was the brutal Port de Larrau (14.7 km climb at 8.1%), which is just 79km into the stage. The race dips into Spain for some 50 kilometres at the summit, the fourth country visited in this year’s Tour. From there, there was little reprieve for the riders, hitting the Alto Laza and the Col de la Pierre St Martin (14.2 km climb at 5.2%) before descending to the start of the difficult, and very steep, first-category Col de Marie-Blanque (9.3 km climb at 7.4%). The riders then climb the infamous Col d'Aubisque (16.7 km climb at 7%), which will reward out-and-out climbing ability and punish the legs of all the major contenders.

The entire Astana Team withdrew from the Tour prior to this stage due to Alexander Vinokourov testing positive for blood doping. Some riders staged a protest against doping at the start.

Another doping scandal hit the Tour today. Cristian Moreni of Italy tested positive for testosterone in a test conducted after Thursday's stage 11. Moreni was questioned by police. Cofidis team manager Eric Boyer told ''Reuters'': "He accepted his wrongdoing and did not ask for a B-sample."

Like Astana did, Cofidis has withdrawn its entire team from the Tour. François Migraine, the team president and CEO of the sponsoring insurance company, Cofidis, said: "It's the only thing to do in such circumstances."