Iran could face sanctions if it is brought before the UN
Shaul Mofaz said that at this stage his government gave priority to diplomatic action aimed at convincing Iran to give up its nuclear programme.
But he added that Israel was preparing for any eventuality and had the "capability to defend itself", after Iran resumed nuclear research.
Iran insists the programme is purely aimed at meeting its energy needs.
However western countries suspect Tehran may be seeking to develop nuclear weapons, and talks over the issue are stalled.
Precedent
The UN's International Atomic Energy Agency (IAEA) agency is due to meet on 2 February to discuss whether to refer Iran to the Security Council.
IRAN'S NUCLEAR STANDOFF Sept 2002: Work begins on Iran's first reactor at Bushehr Dec 2002: Satellites reveal Arak and Natanz sites, triggering IAEA inspections Nov 2003: Iran suspends uranium enrichment and allows tougher inspections June 2004: IAEA rebukes Iran for not fully co-operating Nov 2004: Iran suspends enrichment under deal with EU Aug 2005: Iran rejects EU plan and re-opens Isfahan plant Jan 2006: Iran re-opens Natanz facility
In depth: Nuclear fuel cycle Profile: UN Security Council
Mr Mofaz told a conference in Herzliya that Israel "must have the capability to defend itself, with all that that implies, and this we are preparing".
Israeli leaders have repeatedly stated that any military action would be part of an international effort, and Israeli officials have denied plans for a unilateral preventive strike.
Israeli concerns about Iran have grown since the election of President Mahmoud Ahmadinejad, who has called for Israel to be "wiped off the map".
The warning appears to be a veiled suggestion that if diplomacy fails, Israel may be planning a repetition of its pre-emptive strike against Iraq in 1981.
At the time, Israeli aircraft destroyed the Osirak nuclear research centre near Baghdad.
Concern
However analysts say it would be hard for Israel to achieve similar success in Iran, which has learned from the Osirak attack.
Its nuclear sites are dispersed around the country and heavily protected.
Washington, Israel and many European powers distrust Iran, partly because it had kept its nuclear research secret for 18 years before it was revealed in 2002.
The crisis intensified earlier this month when Iran resumed research on uranium enrichment.
Western countries are concerned because the process could ultimately be used both to generate electricity and to make nuclear weapons.
Israel does not admit or deny having nuclear weapons, but it is widely believed to possess some.
Izraelski minister obrony powiedział, że jego kraj nie zaakceptuje irańskich zdolności atomowych. Powiedział, że  jego rząd w pierwszym rzędzie skorzysta z działań dyplomatycznych lecz dodał że Izrael jest przygotowany na każdą okoliczność i ma środki do samoobrony. W przeszłości lotnictwo Izraela zniszczyło iracki reaktor atomowy, obecnie trudniej byłoby mu powtórzyć tę operację ze względu na to że irańskie ośrodki atomowe są rozproszone w całym kraju i dobrze chronione. Władze Iranu twierdzą, że wykorzystają energie atomową w celach pokojowych, kraje zachodnie podejrzewają Teheran o plany budowy broni atomowej.