Fire crews had been battling a blaze at the Plasco building in the country's capital before it collapsed in a matter of seconds live on television.
A grocery shop owner who was forced by police to leave the area told Reuters the scene was "like a horror movie".
A thick plume of smoke rose over the rubble as many onlookers cried.
The steel skeleton of the building could be seen bending towards the ground as around 100 fire engines and dozens of ambulances surrounded the scene.
The semi-official Fars news agency said police have cordoned off the nearby British and Turkish embassies.
It is not yet known what caused the fire at the building, which contained a shopping centre and clothing workshops.
The blaze is thought to have started on the ninth floor and quickly spread to the workshops above.
Firefighters were initially able to bring it under control, but it quickly flared up and the building collapsed four hours after the fire began, at around 8am UK time.
The 17-storey tower was constructed in the early 1960s by Iranian-Jewish businessman Habib Elghanian and named after his plastics company.
It was the tallest building in Tehran when it was completed in 1962.
Elghanian was charged with espionage and executed in the months after Iran's 1979 Islamic Revolution which brought the current ruling system to power.
GMT 12:45 2017 Sunday ,22 January
Iranian Intelligence excludes terrorism in building collapseMaintained and developed by Arabs Today Group SAL.
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Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©
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