If gcc does not accept -mmcu, you are probably not using a gcc with support for the AVR architecture.

It's normally used like this:

avr-gcc -mmcu=atmega328p

because it's not only the preprocessor, it's actually other tools as well which require this setting (linker, assembler).

Normally the architecture gcc is compiled for is indicated by a prefix, in this case it's avr- by convention.

So the solution is to get a toolchain with AVR support. You can download it from Atmel's web site, even for Linux.

Update

If you like to check the configuration of your gcc, you can use -dumpmachine to check for the target processor

$ gcc -dumpmachine
i486-linux-gnu

$ arm-none-eabi-gcc -dumpmachine
arm-none-eabi

$ avr-gcc -dumpmachine
avr

If you look at the target specific options using --target-help

$ gcc --target-help | grep march
-march= Generate code for given CPU

you can see that the Linux gcc does accept -march as well. It probably fails later.

gcc is a very complex piece of software, because it just supports so many different architectures. From that perspective it works amazingly well.

Another interesting option is -v

$ gcc -v
Using built-in specs.
Target: i486-linux-gnu
Configured with: ../src/configure -v --with-pkgversion='Debian 4.4.5-8'
[...]

to see how that gcc has been built.

And there could be another trap down the road (multi-libs), as you can see here