Greek Cypriots, who represent the island internationally and are backed by the EU, reject a two-state deal which would imply a sovereign status to a breakaway state they view illegal.
"The new negotiation process can only be carried out between the two states. We are right and we will defend our right to the end," Erdogan said.
Cyprus was split in a Turkish invasion on 20 July, 1974, five days after a Greek Cypriot coup engineered by the military junta then ruling Greece.
Decked out in red-and-white Turkish and Turkish Cypriot flags, the celebratory mood in north Nicosia stood in stark contrast with the sombre mood in the south, where Greek Cypriots were woken by air raid sirens marking the day Turkish forces landed 47 years ago.
The United Nations has grappled inconclusively with the Cyprus conflict for decades.
The simmering dispute is now in sharper focus because of competing claims over offshore energy reserves, and a recent re-opening by Turkish Cypriots of part of Varosha, a ghost resort which was the hub of Cyprus's tourism industry before the war.