The Iraqi leader, Saddam Hussein, has flatly rejected a US ultimatum to leave the country or face war.
Saddam's sons hold key positions
A statement from a cabinet meeting chaired by the Iraqi president said Iraq and all its people were "fully ready to confront the invading aggressors and repel them".
The White House described Saddam Hussein's move as his "final mistake".
President George W Bush's spokesman, Ari Fleischer, said allied troops were going to enter Iraq "no matter what".
"If Saddam were to leave, American forces, coalition forces, would still enter Iraq - hopefully they would then be able to enter peacefully because the Iraqi army would not have been given orders to fire on them, and then they could carry out the disarmament of Iraq," Mr Fleischer said.
Baghdad's defiance came as countries seeking a peaceful outcome to the crisis condemned Washington's decision to abandon diplomacy and questioned the legality of starting a war.
Reporting from the Iraqi capital, the BBC's Paul Wood says Iraqis are making final preparations for war - mainly buying food and fuel.
United Nations inspectors have all left Iraq ahead of the expected US-led bombing, which could start as early as 0100GMT on Thursday with the expiry of Mr Bush's 48-hour ultimatum.
Secretary of State Colin Powell said 45 nations had joined Mr Bush's "coalition of the willing" - 30 had promised concrete support whilst 15 preferred to remain unnamed at the moment.
In other developments:
Tears of blood
- UK Prime Minister Tony Blair makes a passionate plea for support in parliament, following the third resignation of a member of his cabinet.
- France may consider assisting the war effort if Saddam Hussein were to use chemical or biological weapons, says the French ambassador in Washington.
- The third main US ally, Spain, will not send combat troops to Iraq, Prime Minister Jose Maria Aznar tells parliament.
- Turkey's Cabinet meets to reconsider putting forward a parliamentary motion allowing US troops on its soil and granting US aircraft the right to use Turkish airspace to launch an attack on Iraq.
- More foreign diplomats leave Baghdad.
Mr Bush's ultimatum to Saddam Hussein and his two sons - Uday and Qusay - was issued during a key speech to the American people from the White House.
But apparently unmoved, the Iraqi leader was shown on state television in a military uniform, chairing a joint meeting of the ruling Ba'ath Party and the decision-making body, the Revolution Command Council.
"Iraq does not choose its path on the orders of a foreigner and does not choose its leaders according to decrees from Washington, London or Tel Aviv, but through the will of the great Iraqi people," the statement from the meeting said.
The Iraqi leader's elder son Uday went on to call on Mr Bush "to leave power with his family".
"Any aggression against Iraq will make them [the Americans] regret their tragic fate and the wives and mothers of the Americans who fight us will cry tears of blood. They should not think themselves safe anywhere in Iraq or abroad," a statement from his office said.
Our correspondent says there is feverish speculation about what last-minute offer Saddam Hussein might make to try to avert the US-UK invasion.
But with the departure of the weapons inspectors, the people of Baghdad know the waiting is almost over, he says.
France and Germany, staunch opponents of the US strategy on Iraq, were vociferous in their criticism, but a string of other nations also lamented Washington's decision to abandon the diplomatic process.
"Iraq today does not represent an immediate threat that justifies an immediate war," Mr Chirac said.
Germany's Chancellor Schroeder said his position was shared by the overwhelming majority of the German people, of the Security Council and the people of the world.
A spokesman for the Vatican said that the US allies had assumed a grave responsibility before God.
And the Russian parliament has postponed a vote on ratifying a new nuclear arms treaty with the US because of differences over Iraq.
In comments echoed by Indonesia, Malaysia questioned the legality of going to war without the backing of the Security Council, and also ousting the leader of another country by military means.
There have however been a few expressions of support, and a commitment of troops by Australia.