The Frenchman, whose name and entry were not released to protect him from possible prosecution in his homeland, came second equal with Brazilian Carlos Latuff, whose caricature showed a Palestinian wearing a uniform like that which Jews were required to wear in Nazi concentration camps.
The pair will share a prize of US $8,000. France is home to the world's second largest Jewish community outside Israel, as well as Europe's largest Muslim population.
The first prize of US $12,000 went to Moroccan Abdullah Derkawi who drew a crane bearing the Star of David at work on a section of Israel's West Bank separation barrier that he depicted bearing a photograph of the gateway to the Auschwitz death camp.
"The Holocaust is a myth and this issue has finally made waves thanks to the action of President (Mahmoud) Ahmadinejad in daring to express himself on the subject and break the Holocaust taboo," Saffar-Harandi said as he announced the prize winners.
None of the foreign winners were present at the award ceremony.
Massoud Shojai, one of the organizers of the contest first announced in February, blamed "political pressure" for their absence.
Iran announced the competition following the re-publication in a number of mainly European newspapers of Danish caricatures of the Prophet Mohammed.
Ahmadinejad has sparked a chorus of international criticism with a series of statements calling into question the massacre of millions of Jewish civilians by Nazi Germany during World War II. During a visit to the United States in September, his reformist predecessor Mohammad Khatami insisted Ahmadinejad did not mean to question the Holocaust itself but its use to defend the creation of a Jewish state on Palestinian land.
"I believe the Holocaust is the crime of Nazism," Khatami told Time magazine. "But it is possible that the Holocaust, which is an absolute fact, a historical fact, would be misused. The Holocaust should not be, in any way, an excuse for the suppression of Palestinian rights," the former president told the New York-based news weekly. "I personally believe that he (Ahmadinejad) really didn't deny the existence of the Holocaust," he added.