Seoul's top envoy to Iran Kim Seung-ho signed the agreement with the chief of the Islamic republic's traffic and policy agency, the Ministry said in a press release. The agreement went into force upon the signing.
"With the agreement, peoples of the two countries can live in each other's country conveniently, and it will especially help South Korean businesses operating in Iran," the Ministry said.
Some 350 South Koreans reside in Iran as of last year.
The agreement was clinched ahead of President Park Geun-hye's landmark visit to Tehran, slated for May 1-3.
Her visit, the first by a sitting South Korean president since the two countries established diplomatic ties in 1962, is expected to focus on bolstering economic cooperation and exchanges.
YNA/MNA