We are not masters of people but servants of this nation. If this nation says we don't want you, we will go, Khatami was quoted as saying by the government-owned daily, Iran.
Khatami made the comments in a speech in Karaj, west of the capital Tehran, on Thursday. State-run television and radio censored the part that discussed a possible resignation.
Khatami's hopes for a compromise with hard-liners have been thwarted in recent weeks after the Guardian Council, which vets all parliamentary legislation, rejected two key reform bills presented by the president.
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Khatami also has come under attack from liberals, including prominent philosopher Aldolkarim Soroush, who accused him of failing to push for reforms since he was elected in May 1997.
The peaceful and democratic uprising of the Iranian people against religious dictatorship in May 1997 was a sweet experience, Soroush said in a letter addressed to Khatami and whose authenticity was confirmed by his relatives.
But your failure to keep the vote and your wasting of opportunities put an end to it and disappointed the nation. Now, failures have turned into unrest, the letter stated.
Soroush was referring to student-led protests last month against the ruling Islamic establishment and the arrests of student leaders and writers.
On Wednesday, hundreds of riot police and plainclothes agents dispersed more than 2,000 people who had gathered in front of Tehran University on the anniversary of a 1999 police raid on a student dormitory that killed one person and injured at least 20.
Blogs and traditional news sources have been blocked inside Iran during this period.