Historically, towns in Iran have been administrative, commercial, and manufacturing centers. The traditional political elite consisted of families whose wealth was derived from land and/or trade and from which were recruited the official representatives of the central government. In larger cities, these families could trace their power and influence back several generations. Influential families were also found among the Shia clergy in the largest cities. The middle stratum included merchants and owners of artisan workshops. The lowest class of urban society included the artisans, laborers, and providers of personal services, such as barbers, bath attendants, shoemakers, tailors, and servants. Most of these, especially the artisans, who were organized into trade associations or guilds, worked in the covered bazaars of the towns.

The urban bazaar historically has been the heart of the Iranian town. In virtually all towns the bazaar is a covered street, or series of streets and alleyways, lined with small shops grouped by service or product. One part of the bazaar contains the shops of cloth and apparel dealers another section those of carpet makers and merchants and still another, the workshops of artisans making goods of copper, brass, or other metals, leather, cotton, and wool. In small towns the bazaar might be the equivalent of a narrow, block-long street in the largest cities, such as Tehran, Esfahan, Mashhad, Tabriz, and Shiraz, the bazaar is a warren of streets that contains warehouses, restaurants, baths, mosques, schools, and gardens in addition to hundreds and hundreds of shops.

The modernization policies of the Pahlavi shahs both preserved and transformed all of these aspects of urban society. This process also led to the rapid growth of the urban population. The extension of central government authority throughout the country fostered the expansion of administrative apparatuses in all major provincial centers. By the 1970s, such cities were sites not just of the principal political and security offices but also of the local branches of diverse government offices such as education, justice, taxation, and telecommunications.

The establishment of modern factories displaced the numerous artisan workshops. Parts of old bazaars were destroyed to create wide streets. Merchants were encouraged to locate retail shops along these new streets rather than in the bazaars. Many of the stores that opened to meet the increased demand for commerce and services from the rapidly expanding urban population were in the new streets. The political elite in the last years of the Pahlavi dynasty spoke of the bazaars as symbols of backwardness and advanced plans to replace some of them with modern shopping malls.

Data as of December 1987