Under the accord inked in Tehran, ATR is to provide the Iranian national flag carrier with 20 ATR 72-600 planes, with options on another 20 planes.
It follows talks in Rome and Paris last week during a visit by Iranian President Hassan Rouhani following the lifting of sanctions over the Islamic Republic's nuclear programme.
"The deal marks the arrival of the newest generation ATRs in Iran, where the first aircraft have been operating since 1992.
"This freshly open market provides a strong potential for the development and expansion of domestic traffic and routes," ATR said in a statement.
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ATR is co-owned by European aircraft manufacturer Airbus and Italian aerospace group Finmeccanica.
ATR is "honoured to take part in this new era in Iran by providing the national airline with aircraft that will strongly contribute to reinforce and boost regional transportation across the country", chief executive Patrick de Castelbajac said in the statement.
Before a nuclear deal with world powers took effect last month, Iran's aviation industry was subject to a US embargo preventing Western manufacturers since 1995 selling equipment and spare parts to the Islamic republic.
The sanctions hindered maintainance operations and pinned to the ground part of Iran's ageing fleet -- currently 140 working aircraft, with an average age of about 20 years.
Deals agreed last week included a $25-billion (22 billion euros) accord under which Iran will buy 118 Airbus aircraft. Carmaker Peugeot and oil giant Total also struck agreements with Iran.