"As the Nazis sought to stamp out civilisation and to set the master race to rule across the earth... while wiping out the Jewish people, so does Iran seek to control the region, spread outwards and destroy the Jewish state," said Netanyahu.
The National Holocaust Remembrance Day lasts until sunset on 16 April.
Pedestrians stand still and traffic comes to a halt at 10am local time as the country marks the start of a two-minute silence held in remembrance of the victims of the Holocaust.
While TV channels broadcast documentaries on the Holocaust, radio networks reportedly play low-key music and entertainment places across the country remain closed.
"Has the world really learned from the incomprehensible universal and Jewish tragedy of the previous century. The bad agreement being drafted with Iran teaches us that the historic lesson has not been internalized," said Netanyahu drawing attention to the framework Iranian nuclear deal between Iran and the P5+1 world leaders.
"The powers turn a deaf ear to the crowds in Iran shouting 'Death to America; death to Israel'. The democratic governments made a momentous mistake before World War Two and we, along with many of our neighbours, are convinced that a bitter mistake has also been made now."
"I think this deal is a dream deal for Iran and it's a nightmare deal for the rest of the world," said Netanyahu.
Recalling his first reaction upon seeing the human remnants of the Nazi death camps, President Reuven Rivlin said: "I remember the first of the survivors who arrived in Jerusalem," he told the hushed audience.
"The face and extent of the horror was exposed to us."