The satellite called Omid (Hope) was launched early on Tuesday after Iranian President Mahmoud Ahmadinejad gave the order to proceed.
Omid was sent into space by the Iranian-produced satellite carrier Safir 2 (Ambassador-2) rocket, which is an upgraded model of carrier Safir 1.
Equipped with two frequency bands and eight antennae, Omid will transmit information to and from earth while orbiting the planet 15 times per day.
The lightweight telecommunications satellite is equipped with remote sensing, satellite telemetry and geographic information system technology as well as remote and ground station data processing.
Omid is a research satellite that has been designed for gathering information and testing equipment. After orbiting for one to three months, Omid will return to earth.
Omid carries experimental satellite control devices, communications equipment and power supply systems to a distance of 250 to 350 kilometers from the earth's atmosphere.
The launch of Omid comes amid celebrations of the 30th anniversary of victory of the 1979 Islamic Revolution.
Iranian President Mahmoud Ahmadinejad in a message congratulated the nation on the new aerospace achievement and emphasized, "Dear people of Iran, your children have sent Iran's first domestic satellite into orbit... May this be a step toward... justice and peace."
"Iran's official presence in space has been added to the pages of history," Ahmadinejad said, press tv reported.
Omid is the third Iranian-made satellite to be sent into space. In 2005, Iran launched its first commercial satellite on a Russian rocket in a joint project with Moscow. Iranian officials first started developing the satellite, which weighs 27 kilograms (60 pounds), in 2006.
Iran has said it wants to put its own satellites into orbit to monitor natural disasters in the earthquake-prone nation and improve its telecommunications.
Iran hopes to launch three more satellites by 2010, the government has said.
Tehran also has an ambitious plan for sending its first astronaut into space in ten years from now.