In an unprecedented revelation, he also included Fatah on Tehran's funding list.
"Many think that problems in the Middle East spring from the Israeli-Palestinian conflict. That's not true. The source of the problem is Iran. The Iranians are giving money to Hamas, Fatah and Hizbullah," Yaalon told the Conference of Presidents of American Jewish Organizations in Jerusalem.
President Mahmoud Abbas' Fatah faction has been supported by the United States and other western nations for its opposition to Hamas' refusal to recognize Israel. Since Hamas' rise to power in January 2006, the two rivals have been locked in bloody power struggle that claimed the lives of dozens of Palestinians.
One hundred representatives from 52 Jewish organizations in the United States attended the conference. Prof. Bernard Lewis and Uri Lubrani, the coordinator of government activities in Lebanon during Israel's occupation of southern Lebanon, also participated.
Lubrani: Zero tolerance with Iran
Yaalon slammed the international community for turning a blind eye to Iran's endeavor to threaten Israel's security and making overt threats to wipe out the Jewish state, deeds he said were "the real problem" in the Middle East.
He also said the Muslim world is awaiting the fall of the United States, charging that the 9/11 terror attacks underscored the fact that Muslim extremists are bent on destroying the last remaining super power.
Prof. Lewis, an expert on Islam, said the Iranian regime is apocalyptic, and its determination to seek nuclear technology underscores its intention on using those weapons against the United States.
"Iran wants nuclear weapons in order to harm the major world power," he said.
He also said the Muslim resentment towards the United States emanates from Washington's support to Israel. "Their aim is to destroy the super power in the world. They watched the fall of the Third Reich in Germany, the fall of the Soviet Union, and now they are waiting to the fall of the United States," he said.
Lubrani, an adviser to Defense Minister Amir Peretz, expressed concern over Iran's influence over Lebanon's Shiite population, many of whom serve in the Lebanese army but owe their loyalty to Tehran's proxy Hizbullah.
Lubrani urged the United States to show zero flexibility on Iran's nuclear issue, adding that a large segment of Iranians oppose President Mahmoud Ahmadinejad's confrontational mantra against the west.