The 1979 Islamic revolution and the 1980-88 war with Iraq transformed Iran's class structure politically, socially, and economically. In general, however, Iranian society remains divided into urban, market-town, village, and tribal groups. Clerics, called mullahs, dominate politics and nearly all aspects of Iranian life, both urban and rural. After the fall of the Pahlavi regime in 1979, much of the urban upper class of prominent merchants, industrialists, and professionals, favored by the former Shah, lost standing and influence to the senior clergy and their supporters. Bazaar merchants, who were allied with the clergy against the Pahlavi shahs, also have gained political and economic power since the revolution. The urban working class has enjoyed somewhat enhanced status and economic mobility, spurred in part by opportunities provided by revolutionary organizations and the government bureaucracy.

Unemployment, a major problem even before the revolution, has many causes, including population growth, the war with Iraq, and shortages of raw materials and trained managers. Farmers and peasants received a psychological boost from the attention given them by the Islamic regime but appear to be hardly better off in economic terms. The government has made progress on rural development, including electrification and road building, but has not yet made a commitment to land redistribution.

Most Iranians are Muslims; 89% belong to the Shi'a branch of Islam, the official state religion, and about 9% belong to the Sunni branch, which predominates in neighboring Muslim countries. Non-Muslim minorities include Zoroastrians, Jews, Baha'is, and Christians.