The airline was established in 1991 and began operations in June 1992 as Iran's first private airline. The name of Mahan is taken from Historical city of Mahan in Kerman Province. The Airline joined the IATA in 2001 and is owned by Mol-Al-Movahedin Charity Institute (96%). As of March 2007 it has 2,511 employees. At its operational launch in May 1993, Mahan Air fleet consisted of two Tupolev 154 aircraft, with a staff of 99 and a route network from Tehran to two domestic destinations. Growth was initiated with the addition of Airbus A300 wide-body aircraft to the fleet in 1999 and the Airbus A310 in 2001. This enabled the airline to reach beyond the regional destinations it served. Its route network now spans 50 destinations in 12 countries with a fleet of 38 Airbus and Boeing 747 aircraft. It holds 13% of all international flights from Iran, and 8% of the domestic market.
Due to the sanctions imposed by the US, Iranian airlines can only acquire aircraft which are at least seven years old and have been purchased through a third party rather than directly from Boeing or Airbus.
Three 747-400s were according to the British High Court unlawfully taken by Mahan from their real owners Blue Sky Airlines in 2008 using forged bills of sale. When ordered to bring the aircraft back to Europe, Mahan apparently claimed they could not do so because they were being investigated by the Iranian authorities for fraud and the aircraft had to be kept in Iran.