Ahmad Vahidi is wanted in connection with the 1994 bombing of a Jewish community centre that killed 85 people.
Last week, Argentina commemorated the 15th anniversary of the worst-ever terror attack on its soil, the bombing of the Argentine-Israeli Mutual Association building.
Now Buenos Aires is denouncing the Iranian government's decision to nominate one of the prime suspects wanted in connection with the bombing as its defence minister.
Mr Vahidi has been on Interpol's red notice list since November 2007, meaning that the organisation distributes Argentina's arrest warrant to all its member states.
Argentina says Mr Vahidi's nomination is an affront to Argentine justice and to the victims of the attack.
Iran is rejecting the criticism as a "Zionist plot".
"How come they didn't bring it up in the past?" asked Mr Ahmadinejad's press adviser Ali Akbar Javanfekr, speaking about the Argentine complaint.
"Mr Vahidi was a deputy defence minister and this is very senior political position," he said.
"Therefore it seems that this is a new trick being planned and is basically a Zionist plot."