The plane was headed to the eastern city of Tabas, the IRNA and Fars news agencies said, when it crashed around 9:18 am local time, after leaving Mehrabad airport.
But it plummeted into the Azadi neighbourhood, just west of central Tehran, close to a residential area for military families.
"All the passengers are dead," a fire service spokesperson said on IRNA.
Iran's deputy transport minister Ahmad Majidi said the Antonov An-140 turboprop plane was run by Sepahan Airlines and it had 40 passengers, including six children, and eight crew.
An aircraft tailfin bearing Sepahan's dolphin logo could be seen sticking out of the road as security forces cordoned off the crash site.
Black smoke billowed from the wreckage, with officials saying the plane hit a wall and trees, close to a market.
"The scene was terrible, with the back of the plane in the middle of the street," one eyewitness said.
"We were lucky because there was a market 500 metres away and a lot of people were there."
Another eyewitness told state television: "I was on my motorbike and I heard something behind me. I turned round and it was a plane, so I got on to the ground because it was so close."
Mehrabad Airport is near central Tehran and is Iran's main domestic hub and by far the busiest of the country's airports, serving routes to all Iranian cities.
Most international flights take off from Tehran Imam Khomeini International Airport, which is located further west of the Iranian capital.
Alireza Jahangirian, the head of Iran's civil aviation authority, said: "The plane crashed in trees. There were no casualties on the ground."
The Antonov An-140 is a small aircraft designed for regional use and with a range of around 2,400 kilometres and it can carry up to 52 people. Iranian airlines are one of the plane's biggest users.
Iran has suffered several air crashes in recent years, blamed on ageing planes, poor maintenance and a shortage of new parts because of international sanctions.
Airlines, including those run by the state, are short of finance and have seen business suffer because of banking restrictions imposed on the Islamic republic by the United States and Europe.
Iran's last major air crash was in January 2011, when an Iran Air Boeing 727 shattered on impact while attempting an emergency landing in a snowstorm in the country's northwest, killing 77 people.
And in July 2009, a Russian-made jetliner crashed shortly after taking off from the capital, killing all 168 on board.
COMMENTS (11)
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@Timorlane: What most of the commentators are suggesting to you is that your comment was misplaced. You could perform this 'anti Iran' tasks on some other news item.
Iran for decades has been abetting sectarian violence in Pakistan, it's border forces keep killing civilian Pakistanis and Pakistani soldiers, Iran has been siding with India over issues ranging from Afghanistan to Kashmir, Iran's government keeps an overtly hostile attitude towards Pakistan yet there are people in our unfortunate country who appear more loyal to Iran than the country they live in, what a pity
R.I.P Another bad news... Definitely not a Good Year for airlines industry.
@Timorlane:
Iran accused Pak, like the rest of the global community, for extremist militancy across its borders, which is not unfounded. Clearly you meet their concerns on that front with prejudiced derision, spouting a misleading suggestion about them making an unreasonable claim against Pak in regards to the unrelated aviation disaster they just suffered.
Why so many air crashes these days? I used to think air travel is much safer but now i'm always scared when myself or some close family friends are travelling. God knows whats the reason of these frequent air crashes but this is scary.
@Timorlane: Why would they blame us?
@ Timorlane..Funny, That you mention Pakistan.....I wonder why !!!! Maybe you should work on your Image....
@Timorlane: Purely out of a line comment and yet ET let this go - only you have a good idea as to why Iran would put a blame on Pakistan for a private airliner crash. The story has sufficiently covered that the US and Europe's financial sanctions on Iran have affected their citizens in one way or the other. Pakistanis would know better how sanctions affect the normal life of citizens in this globally connected world as they have faced sanctions in the past and probably will in the future.
Allah saves everyone. I wonder what happens to airlines. This is probably the 5th incident in such a short period of time.
May all passengers rest in peace.
Iran may accuse Pakistan for this
R.I.P.