Leaders of the eight-member bloc attending a summit in Tajikistan did not announce a timeline for Tehran's membership of the multilateral alliance.
Members of the China and Russia-led Shanghai Cooperation Organisation have endorsed Iran's future membership of the bloc that already includes South Asian rivals India and Pakistan.
Friday's decision comes as Moscow and Beijing have moved to assert themselves as key players in the region, after the United States' hasty retreat from Afghanistan and the Taliban's takeover of the country.
"Today we will launch procedures to admit Iran as a member of the SCO," said Chinese President Xi Jinping, speaking via video link from China in comments translated into English.
The organisation, which seeks to combat ethnic separatism, religious extremism and terrorism in Central Asia, is holding a summit in Tajikistan this week.
Iran's membership was welcomed by Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, who were attending the summit virtually, and Pakistani Prime Minister Imran Khan, who was at the summit in person.
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Speaking in the Tajik capital Dushanbe, Iranian President Ebrahim Raisi thanked the SCO's eight members for supporting its bid.
"Please accept my appreciation. May God's peace and blessings be upon you," Raisi said, according to an audio translation provided at the summit.
Iranian Foreign Minister Hossein Amir Hossein Amir Abdollahian said joining the bloc would have an "important impact" on Tehran's cooperation with the countries.
SCO leaders did not announce a timeline for bloc observer Iran's membership.
Tehran applied for full SCO membership in 2008 but its bid was slowed by the sanctions imposed on the country by the United Nations and the United States over its nuclear programme.
The accession of Pakistan and India to the SCO in 2017 raised questions about the future direction of cooperation in the group.
Iran's membership could pose fresh geopolitical complications.
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Apart from Moscow and Beijing, other founding members of the SCO are former Soviet Central Asian states Kazakhstan, Kyrgyzstan, Kazakhstan, Tajikistan and Uzbekistan.
Afghanistan holds observer status at the SCO, but was not invited to observe proceedings in Dushanbe in the wake of the Taliban's seizure of power.
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