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Dress code in Iran
Iran is a country with a dress code that respects Islamic rules including “Hijab”, the Islamic dress-code, which is a law in Iran. However such rules are not observed strictly, especially for tourists and foreigners. Basically, the rules are quite simple: for men, no short pants or extreme short sleeve and tight shirts. Women need to cover their hair and wear long sleeved and long pants A common way of dressing for women is wear "Manteu" which is long sleeved shirt that comes down to your mid- thigh or longer, paired with a simple scarf wrapped loosely around the head covering your hair

What to wear in Iran
Most people are shocked by the way people dress in Iran once they arrive, as the reality is far from the stereotypes. Iranian women are typically stylish and take great care in their appearance. It is not uncommon to see hair exposed under very small loose fitting scarves. Many Iranian women wear jeans or related clothes with a loose fitting long sleeve top which covers them down to the mid-thigh area. It is also common to see makeup and varnished nails.
Yes, Iran is a country with dress code. However, very few people know that the typical stereotype of all Iranian women being forced to wear black chadors whilst in public is completely false.
Currently in Iran, the Islamic dress code is still observed all over the country. The code calls for women to cover their hair, necks and arms. Modern women in Iran today, wear a "manteau" or overcoat, similar to a uniform. The overcoats have long sleeves and usually come below the knee, and a scarf or shawl is used to cover the hair. This can be worn by folding the two opposite corners of a scarf to get a triangle and tying the scarf around your head. Trousers or dark stockings are worn under the overcoat.
For men, generally, shorts, T-shirts and ties are not worn in public. You will find many Iranians who dress in a very Western style for private functions and events. Therefore the fashions really depend upon the destination and purpose of your trip. When dealing with government agencies, schools, embassies, and the like, obeying the rules is highly recommended.

Chador
So what is a chador? The chador is a form of dress, worn by some individuals in Iran, which consists of a full length semi-circle of fabric. Women are required to hold the material together with their hands or teeth as the garment typically does not contain any fasteners. Iranian women typically cover their bodies in full below the chador with loose fitting clothing / dress. The cover extends to a scarf or ‘Hijab’ which is worn to cover their hair.

Tips:
Here are a few tips to specify and describe the dress code in Iran:
Gentlemen! Shorts are not acceptable in public. 
Wearing ties or bows and T-shirts is all right.
Ladies! You don’t have to worry about maintaining your hijab all the time. Normally the maximum penalty for disregarding the Hijab rule is a simple request (usually in a kind way) by police or authorities to make it

correct. There are some minimum requirements for female traveler’s dress-code in public places:
1. Color: It's only a rumor that wearing must be dark in Iran. There is no limitation in this case and we recommend you use light colors especially in summer.
2. Head: Although hair must be covered but it does not mean you should have a tight scarf around your head. It's quite acceptable for women to let some of their hair fall freely. You can also use appropriate hats & caps as well as scarves. The scarf is the most common covering for head and it’s called "Roosari" in Persian.
3. Body: Body and arms should be covered by loose clothes called a Manteau which is similar to a light overcoat.
4. Legs & feet: Legs should be covered down to ankles. Tight jeans are no problem and you can wear sandals with bare feet.

Tip1: In winter time, apart from covering the head, the rest is the same as what you wear in your home country.
Tip2: It is best to enter Iran with a coat and a scarf and then select your own style by watching the Iranian women in the streets.
Tip3: In some holy shrines you need to have a Chador to enter and it will be given to you in the entrance.
Tip4: In international flights to Iran, you need to respect the dress code rule as soon as the plane enters Iranian air space. Watching the flight attendants will give you a good idea of when you are required to put on your scarf and manteau.