Thousands of opposition supporters have clashed with security forces in the centre of the Iranian capital, Tehran.
Police used tear gas and detained dozens rallying in solidarity with uprisings in Egypt and Tunisia. There was one report of a death in Tehran.
The BBC also received reports of similar protests being held in the cities of Isfahan, Mashhad and Shiraz.
Earlier, the police placed opposition leader Mir Hossein Mousavi under house arrest, according to his website.
It said the move was intended to prevent the former prime minister attending the march in Tehran, which the authorities had prohibited. The road leading to Mr Mousavi's house was also blocked by police vans.
Fellow opposition leader Mehdi Karroubi, a former speaker of parliament and a senior cleric, is also reportedly under de facto house arrest.
In their first major show of dissent since Ashura in December 2009, when eight people were killed, thousands of opposition supporters defied the government ban and gathered at Tehran's Azadi Square on Monday, chanting, "Death to dictators".
Riot police and plain-clothes police backed by the elite Republican Guard used tear gas to disperse the protesters, he adds.
Police also fired paintball guns at the demonstrators and beat some with batons.
The fiercest clashes were reported on Azerbaijan Street, close to Azadi Square, and a number of ambulances were seen coming and going. Witnesses told the Associated Press news agency that at least three protesters were wounded by bullets, with dozens of others beaten by the security forces and taken to hospital.
Iran's semi-official Fars news agency reported that one person had been shot dead by protesters and several others wounded.
Mr Mousavi's website, Kaleme.com, said that - according to unconfirmed reports - "hundreds of protesters" had been arrested. There has been no official confirmation, but witnesses told BBC Persian that dozens had been taken away in police vans from the area.
Police also later surrounded Tehran University and Sharif University, and the houses of former President Mohammad Khatami and Abdollah Nuri, a former interior minister and head of Tehran City Council.
As night fell, riot police remained deployed in central Tehran, but the protesters dispersed. The local electricity supply was also cut.
Although Iran's establishment officially supports the Egyptian protests, it says the rallies in Iran are a "political move" by opposition leaders.
In anticipation of the rally, the authorities stepped up security in the capital, blocked access to internet sites, and started jamming satellite news channels. Police helicopters also hovered overhead.
Analysts say Tehran is trying to stop opposition groups from using the Egypt rally as a means to re-ignite anti-government protests of 2009.
US Secretary of State Hillary Clinton hailed the courage and aspirations of the protesters, and spoke of the Iranian government's "hypocrisy".
"We are against violence and we would call to account the Iranian government that is once again using its security forces and resorting to violence to prevent the free expression of ideas from their own people," she told reporters in Washington.
They have a few things going against them. For one, the Iranian people are not Arab. The nationalistic solidarity that spurred on the protests in the Arab world isn't there. Second, unlike Egypt and Tunisia, the Iranian government has demonstrated in the recent past a willingness to brutally crack down and terrorize a protesting population. The Iranian military is unlikely to be as much on the people's side as the Egyptian military was. Finally, Iran cannot be easily influenced by the international community and certainly not by the United States, which given the fact that it bank rolls the Egyptian military cannot be denied to have influenced the outcome in Egypt.