Photo of George W Bush courtesy of the BBC
In a speech to US war veterans in Reno, Nevada, Mr Bush renewed charges that Tehran has provided training and weapons for extremists in Iraq.
"The Iranian regime must halt these actions," he said.
Earlier, Iranian President Mahmoud Ahmadinejad warned that US authority in the region was rapidly collapsing, and Iran would help fill the void.
"Soon, we will see a huge power vacuum in the region," Mr Ahmadinejad said.
"Of course, we are prepared to fill the gap, with the help of neighbours and regional friends like Saudi Arabia, and with the help of the Iraqi nation."
'Nuclear threat'
In his speech to the American Legion, Mr Bush hit back, accusing Iran's Revolutionary Guards of funding and arming insurgents in Iraq.
And he said Iran's leaders could not avoid some responsibility for attacks on coalition troops and Iraqi civilians.
"I have authorised our military commanders in Iraq to confront Tehran's murderous activities," he said. Bush warns Iran over insurgents (more)
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US ‘willing’ to confront Iran
Mark Alexander
