Religious, political and cultural red lines represent obstacles to filmmakers and actors in the Islamic republic. Scripts must be pre-approved by the state.
Most learn to live with the restrictions but some leave the country, seeking more artistic freedom.
"The Salesman" by Oscar-winning director Asghar Farhadi is challenging for the prestigious Palme d'Or while "Varoonegi" (Inversion) directed by Behnam Behzadi, is competing in the sidebar section "Un Certain Regard".
Farhadi's latest effort has already generated interest from US distributors, The New York Times quoted French co-producer Alexandre Mallet-Guy as saying.
This year in Cannes, two Iranian actresses compete for best actress; self-exiled Golshifteh Farahani in "Paterson", by the award-winning US director Jim Jarmusch, and Taraneh Alidoosti in Farhadi's "The Salesman".
The momentum is partly due to Farhadi's talent, most notably marked by his best foreign film Academy Award in 2012 for "A Separation", a dark but touching tale of family break up set in Tehran.
"With the large global distribution of this film Farhadi gave a great visibility to Iranian cinema, that in fact started long before him," Agnes Devictor, a professor at the Sorbonne in Paris, specialising in Iranian cinema, told AFP.
"A Separation" won a Golden Globe in the same category and his follow-up, "The Past", set in France, was nominated for the Palme d'Or in 2013.
Farhadi is not alone in gaining accolades. In 2015, "Nahid", Ida Panahandeh's debut feature won the promising future prize in Un Certain Regard.
Dozens of cinemas screened the film in France, Spain and Greece.
Distribution companies such as the France-based Noori Pictures, headed by Katayoon Shahabi, have played a major role in bringing Iranian films to a wider audience.
Shahabi, a "lioness" who has become "the embodiment of independent film abroad" according to Devictor, is among the eight jurors for Cannes 2016.
The success abroad reflects a continued rise at the box office.
Domestic sales in the first month of the Persian year (March 20 to April 20) totalled 267 billion rials ($8.9 million), more than the entire annual box office two years ago, media reported.
But filmmaking in Iran has its own challenges.
Jafar Panahi, whose "Taxi" -- barred from screening in Iran -- won the Golden Bear in Berlin film festival in 2015, is not allowed to exit the country or make films.
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At the beginning of Cannes this year more than 30 major European film organisations appealed to Iran's government to grant clemency to a young director sentenced to 223 lashes.
Keywan Karimi, 30, was sentenced to six years in prison in 2015 but five years of the term was suspended later.
Other stars have fallen foul of the authorities. Farahani, lead actress in Farhadi's "About Elly", was one of those who left Iran a few years ago.
The first top Iranian actor to star in a Hollywood film, she raised eyebrows in her homeland when she appeared in Ridley Scott's "Body of Lies" in 2008, alongside Leonardo DiCaprio.
But beyond the big screen Farahani, who is starring in the fifth of the "Pirates of the Caribbean" films, caused major controversy in her homeland by posing nude for a French magazine.
Leila Hatami, Farhadi's top actress in "A Separation" and a Cannes 2014 juror was criticised by Iranian authorities after kissing the Cannes president Gilles Jacob on the cheeks when on the red carpet.
She later apologised.
Abbas Kiarostami, one of the most well-known Iranian directors worldwide working in France for over a decade, believes recent cinema success comes from a wave of independent filmmakers.
"On the one hand there is the state cinema, financed by the authorities... then there is an independent sector that is flourishing," said Kiarostami who won the Palme d'Or at Cannes in 1997 for Taste of Cherry (Ta'm e Guilass).
"Today, unknown filmmakers are arriving from the most far-flung provinces."
Amir Pouria, an Iranian film critic, told AFP that Farhadi has helped break down Western stereotypes of movies coming out of the Islamic republic.
"The world has accepted that Iran's cinema is capable of cinematic production with technical standards, and is not being paid attention to only for an exotic atmosphere and common oriental tourist interests."
But still, it is the "individuals" that make up Iran's cinema, he believes.
Politics also has a role although the impact of the 2013 election of the moderate President Hassan Rouhani is yet to be seen, Devictor said.
"It's still too early to make any statement on the evolution of the cinema sector under President Rouhani even if we can observe some very positive evolutions."
American independent legend Jarmusch also paid tribute to Iranian cinema in the press conference for "Paterson" on May 16.
"I am very aware of the poetry in the cinema of Iran and I've said this for 15 years probably that this is one of the gardens of cinema on our planet."