Recep Tayyip Erdogan, the Turkish prime minister, said the position of the immigrants, many of whom have lived there as refugees for a generation, was being reviewed in the wake of the row.
Armenia claims more than 500,000 of its countrymen died in bitter in-fighting as the Ottoman Empire disintegrated at the height of the First World War.
Turkey concedes that tens of thousands died in ethnic fighting but vehemently disputes accusations that massacres were systematically planned.
Tensions with Armenia have recently escalated as a well-organised worldwide campaign has persuaded the American Congress and Swedish parliament to adopt resolutions condemning the incidents as "genocide".
An Armenian Genocide Remembrance Day Bill has also been put before the House of Commons and Mr Erdogan has warned Gordon Brown that relations would suffer if parliament passes it.
Turkish law already makes discussion of genocide an offence punishable by imprisonment.
"There are currently 170,000 Armenians living in our country. Only 70,000 of them are Turkish citizens, but we are tolerating the remaining 100,000," said Mr Erdogan.
"If necessary, I may have to tell these 100,000 to go back to their country because they are not my citizens. I don't have to keep them in my country."
The suggestion has proved controversial in Turkey with Ahmed Davutoglu, Turkey's foreign minister, rejecting any calls to drive out Armenians.
Mr Davutoglu said the move would put Turkey in the "hot seat" as it attempted to fend off charges of ingrained racial prejudice.
He said: "If we do it, it will provoke other states that opposed our policy to use the move as a bargaining chip. All newspapers will publish photos of deported Armenians and it will be called a nationalism."
Turkey has been dismayed by the campaign as it had been attempting to establish normal diplomatic relations with the ex-Soviet state.
Mr Erdogan said its neighbour should distance itself from the overseas community leading the lobbying.
He said: "Armenia has an important decision to make. It should free itself from its attachment to the diaspora. Any country which cares for Armenia, namely the US, France and Russia, should primarily help Armenia to free itself from the influence of the diaspora."
But yesterday there was uproar in Armenai over the suggestion of deportations. Hrayr Karapetyan, an Armenian MP, condemned Mr Erdogan's remarks as blackmail.
"The statement once again proves that there is an Armenian genocide threat in present Turkey, thus world community should pressurise Ankara to recognise [the] genocide," he said.
Turkey allows visa free access from much of the Caucuses and Central Asia. As a result its cities are populated by a high number of illegal immigrants.
The small community of Armenians who hold Turkish citizenship have often borne the strain of the country's political tensions.
