Ocalan, who has spearheaded a 14-year separatist campaign in southeast Turkey, urged Italy meanwhile not to bow to Turkish pressure, but to grant him political asylum.
In Rome, Prime Minister Massimo D'Alema told Turkey's ambassador that Italy would stick to the letter of the extradition law and hoped the case would not harm ties between the two NATO allies.
Speaking to parliament in Ankara, Yilmaz said the rebel's presence in Rome, where he was arrested last week, had put NATO ally Italy's commitment to justice on trial. In biting terms, he demanded extradition.
"If they do not pass this test, not only will it remain as a stain on their record but they will also become accomplices to every murder ever committed by the PKK," he said.
"No government of the Turkish Republic would ever forget this," he said, to loud applause from political enemies and allies alike.
The prime minister, facing the imminent collapse of his government, said Turkey would never negotiate with Ocalan's "bloody-handed" Kurdistan Workers Party (PKK).
The guerrilla leader, a thick-set, middle-aged man known as "Apo," has sought to present himself as a political figure since his detention in Rome and has been backed by a network of militant PKK sympathizers rallying in the Italian capital.
"I ask Italy to mediate between us and Turkey for a political solution to the Kurdish issue...We are ready for dialogue with Turkey, Europe and the United States," he was quoted as saying in the daily .
"I can't believe Italy could be so cowardly as to hand me over to Turkey or Germany," he added.
Yilmaz has called on the two million Turks living in Europe to press the campaign for Ocalan's extradition. He is on trial in absentia in Turkey for treason and is also wanted in Germany for attacks on Turkish targets there.
The campaign led by Ocalan in the rugged southeastern corner of Turkey has cost over 29,000 lives. His suspected presence in Syria weeks ago sparked friction with Damascus and sent war jitters through the Middle East.
Italy's constitution is likely to prevent extradition because Turkish law technically permits the death sentence.
Turkish cabinet attempts to scrap capital punishment specifically to ensure a trial for the rebel chief have been hampered by a general government crisis in Turkey. Yilmaz seems likely to lose what amounts to a confidence vote next week because of a scandal linking the government to organized crime.
The PKK regards Italy, home to many Kurdish refugees, as the European country best disposed towards it.
Several thousand Turks protested outside the Italian embassy in Ankara in a groundswell of popular rage against Italy.
"Give us Apo so my boy can rest in peace," said Dondu Cankaya, carrying a photograph of her conscript son Soner, 20, who was killed by the PKK near the Iranian border in 1994. "Terrorist Italy," other protesters chanted.
The rebels have stepped up bomb attacks in recent days.
A PKK bomb ripped through the car of a Turkish government party official in the southeastern province of Hakkari. Nobody was injured in the blast outside the house of the local head of Yilmaz's Motherland Party.
On Tuesday a rebel bomber had killed herself and wounded six people in a suicide attack near a police headquarters in Hakkari.
Tension in western Turkish cities has grown in recent years with an influx of hundreds of thousands of Kurds who have fled the fighting. Many say the army drove them from their homes.
Turks and 50 supporters of a legal Kurdish political party swapped punches in the city of district in Izmir, western Turkey, on Tuesday night.
©1998 CBS Worldwide Corp. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. Reuters contributed to this report