Castro ripped into President Bush's war on terrorism as "hypocritical" before hundreds of thousands gathered under a blistering sun in Havana's revolution square.
"The whole world knows that Luis Posada Carriles, the most famous and cruel terrorist of the Western Hemisphere, entered the United States and is seeking asylum," said Castro, dressed in his customary military uniform and appearing in good health at 78.
Posada, a CIA-trained explosives expert, is blamed by Havana for the 1976 bombing of a Cuban civilian airliner that killed all 73 passengers and crew aboard, and a wave of bomb blasts in Cuban hotels that killed an Italian tourist in 1998.
The Posada case "reveals the empire's immense hypocrisy, lies, and singular cynicism," Castro said of the United States.
Robert Marsh, a U.S. citizen who's fiance was killed in the 9/11 attack on the World Trade Center, thanked Cuba for rapidly condemning the 2001 attack and announced a letter writing campaign to demand U.S. authorities bring Posada to justice.
"The administration has allowed terrorists that target Cuba to operate with impunity from right within the United States," Marsh said.
Since Posada's lawyer announced in Miami on April 11 that the Cuban exile was in the United States and seeking political asylum, Castro has repeatedly demanded his arrest and extradition to Venezuela, where he is wanted for trial.
Posada and three Cuban-born U.S. citizens were jailed in Panama in 2000 for plotting to assassinate Castro at a regional summit, but pardoned last year by that country's outgoing president Mireya Moscoso.
Castro's hour-long speech followed those of other left-wing leaders from Latin America, such as former Sandinista president of Nicaragua, Daniel Ortega, and former Salvadoran guerrilla Shafik Handal, leader of the Farabundo Marti Liberation Front.
Several million Cubans attended rallies across the Caribbean island on Sunday demanding Posada's arrest and extradition to Venezuela, whose leftist government has requested his extradition to stand trial for escaping from prison.
Posada was jailed in Venezuela in the 1980s in connection with the plane bombing, though never convicted, and escaped from a high security prison disguised as a priest.