Germany is funding the 50 diesel-electric locomotives that will be supplied by Mapna, the local partner of Germanys Siemens, to the Islamic Republic of Iran Railways.
The contract is estimated to be worth between $150m and $200m.
The contract between Siemens, Mapna and the Islamic Republic of Iran Railways, was signed in October 2016.
The 50 locomotives are to be built in a factory owned by Mapna in Karaj, Irans fourth largest city. Delivery of the locomotives is expected in 2018.
It is understood that funding for the locomotives is part of the $1.2bn funding being negotiated between Iran and Germanys government-owned development bank KfW Import-Export Bank (Ipex).
Other projects that are likely to be included in the funding programme are the electrification of the Tehran-Esfahan route and the planned Tehran-Mashhad high-speed railway project.
The development of these rail lines, among other initiatives, were specified in the memorandum of understanding (MoU) signed between Siemens and the Iranian government in early 2016.
Mapna and Siemens recently completed the delivery of 150 locomotives to the Islamic Republic of Iran Railways. The contract, signed in 2012, was worth an estimated $600m.