The first Iranian envoy to Denmark arrived in 1691 in order to negotiate the release of the Iranian-owned cargo of a Bengali ship seized by the Danish fleet. The Iranian diplomat had been issued with diplomatic credentials by Suleiman I of Persia (Shah 1666-1694) and opened negotiations with King Christian V of Denmark. He was unable to secure the release of the cargo.
In 1937 archeological excavation on a farm in Jutland led to the discovery of two Sassanid coins, one of Peroz I and the other of Khosrau I, part of a hoard found in a vase. The circumstances in which these coins reached Denmark are not yet certain.
In 1933, a Danish consulate was established in Tehran which was later upgraded to an embassy. Following a state visit in 1958, Iran established an embassy in Copenhagen.
The 2006 Muhammad cartoons controversy saw the Danish embassy to Iran attacked by protesters and the Iranian Ambassador to Denmark called to Tehran; thus straining political and economic interaction between the two countries. In 2010, the Iranian Foreign Ministry's Director General for Northeastern Europe Behnam Behrouz and the Deputy Danish Foreign Minister Anne Steffensen spoke of expanded commercial ties. Steffensen said "Danish companies will be encouraged to boost their activities in Iran's market and we hope that the resolution of Iran and the West's nuclear standoff would pave the way for further expansion of ties in all areas." She also said the US-backed sanctions on Iran would have no bearing on bilateral economic relations.
On February 7, 2006, 20 protesters stormed the Royal Danish Embassy, before being forced out by Iranian riot police.