The Iranian central bank is to convert the state's foreign dollar assets into euros and use the euro for foreign transactions.
"The government has ordered the central bank to replace the dollar with the euro to limit the problems of the executive organs in commercial transactions," Gholam Hossein Elham, a government spokesman, said on Monday.
"We will also employ this change for Iranian assets [in dollars] held abroad."
Elham said that Iran's budget would in future be calculated in euros.
"Until now the budget has been calculated according to revenues in dollars but this calculation will now change," he said.
Oil revenue
The move comes amid pressure from the United States for the UN Security Council to agree sanctions against Iran over its controversial nuclear programme.
The US alleges that Iran is covertly building a nuclear weapon. Iran says that its nuclear programme is purely for civilian use.
Elham implied that the move to the euro would also apply to Iran's oil revenues.
"Foreign income sources and oil revenues will be calculated in euros and we will receive them in euros in order to put an end to our dependence on the dollar," Elham said.
Bankers in Iran have said it has become difficult to receive Iranian-held money denominated in dollars from European bank accounts.
They said that this was because of US pressure on European banking giants not to allow dollar-denominated funds to be sent into, or out of, the Islamic republic.