The contract was signed during a ceremony in the Iranian capital, Tehran, attended by Iran's Minister of Roads and Urban Development Abbas Akhoundi.
According to the terms of the agreement, an Iranian-Korean consortium will build 450 railway wagons within five years.
In late October, the head of Islamic Republic of Iran Railways, Saeed Mohammadzadeh, had said Iranian and South Korean companies would jointly produce railbuses under a to-be 700-million-euro deal that is expected to be signed in the near future.
Each day over 500,000 cars serve commuters traveling to and from Tehran posing economic, environmental and health hazards to the population.
Last year, six million out of 32 million suburban passengers in Iran were transported by rail.