After drawing with USA in their opening match, Rob Page’s side needed a win in the match to give them a realistic chance of reaching the last 16, ahead of their meeting with England next week.
Goals scored by Rouzbeh Cheshmi and Ramin Rezaeian in stoppage time gave Wales their first loss of the campaign.
It came after Wales goalkeeper Wayne Hennessey was shown a red card late in the match. He was sent off the match after he came charging out of his penalty area and missed an attempted clearance, clattering Iranian striker Mehdi Taremi in the process.
Wales managed just 10 shots against Iran, with three of those on target, despite dominating the ball prior to Wayne Hennessey’s red card. They also managed to string together nearly double the amount of passes, too.
The European country will need to beat England in their next match to stand a chance to advance to the next level in the competition.