The first model, which will be made jointly by manufacturers in Iran, Malaysia and Turkey, is expected to appear in showrooms in 2011.
Customers will be able to select Islamic features in their vehicles, such as a compass to enable the user to determine the direction of Mecca.
However, these features will not be standard and the cars will be sold in non-Muslim markets.
“Each Islamic country can order the additional equipment based on its own needs,” Iran Khodro’s chief executive and president, Manouchehr Manteghi said at a news conference in Tehran. “In addition to Islamic countries, this car is capable of being presented in all global markets.”
Iran is the Middle East’s leading car producer.
Iran Khodro is the largest car manufacturer in Iran, supplying an estimated 67 per cent of the local car market.