An inauguration ceremony was held on Sunday by the country's communications and information technology minister, Mahmoud Vaezi.
The state news agency Irna said the initiative would offer "high quality, high speed" connections at "low costs".
But critics suggest the true aim is to tighten the authorities' control over citizens' use of the net.
Although Iran already blocks access to overseas-based social media services - including Twitter, Instagram and Facebook - many users still access them via proxy sites and virtual private networks (VPNs).
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