The Safavid dynasty, ruling from 1501 to 1722 with a brief restoration from 1729 to 1736, is often seen as the commencement of modern Persian history. They established the Twelver school of Shi'a Islam as the state religion, a pivotal event in Muslim history. At their height, the Safavids controlled modern Iran, Azerbaijan, Armenia, Georgia, parts of the Caucasus, Iraq, Kuwait, Afghanistan, and parts of Turkey, Syria, Pakistan, Turkmenistan, and Uzbekistan, making them one of the major Islamic "gunpowder empires" alongside the Ottoman and Mughal Empires.^[44]

Founded by Ismāil I, who became Shāh Ismāil^[45] after capturing Tabriz in 1501, the Safavid dynasty emerged victorious in the power struggle that ensued in Persia after the disintegration of the Kara Koyunlu and the Aq Qoyunlu. Ismāil swiftly consolidated his rule over all of Persia.

The Safavid era saw significant administrative, cultural, and military developments. The dynasty's rulers, notably Shah Abbas I, implemented substantial military reforms with the help of European experts like Robert Shirley, strengthened commercial ties with European powers, and revitalized Persian architecture and culture. Shah Abbas I also pursued a policy of deporting and resettling large numbers of Circassians, Georgians, and Armenians within Iran, partly to reduce the power of the Qizilbash tribal elite.^[46]

However, many Safavid rulers after Abbas I were less effective, indulging in leisurely pursuits and neglecting state affairs, leading to the dynasty's decline. This decline was exacerbated by external pressures, including raids by neighboring powers. In 1722, Mir Wais Khan, a Ghilzai Pashtun chieftain, revolted in Kandahar, and Peter the Great of Russia capitalized on the chaos to seize Persian territories. The Afghan army, led by Mahmud, Mir Wais' son, captured Isfahan and proclaimed a new rule. The Safavid dynasty effectively ended amid this turmoil, and in 1724, Iran's territories were divided between the Ottomans and the Russians under the Treaty of Constantinople.^[47] Iran's contemporary Shia character, and significant segments of Iran's current borders take their origin from this era.

Prior to the rise of the Safavid Empire, Sunni Islam was the dominant religion, accounting for around 90% of the population at the time.^[53] During the 10th and 11th centuries, Fatimids sent Ismailis Da'i (missioners) to Iran as well as other Muslim lands. When Ismailis divided into two sects, Nizaris established their base in Iran. After the Mongol raid in 1256 and fall of the Abbasids, Sunni hierarchies faltered. Not only did they lose the caliphate but also the status of official madhhab. Their loss was the gain of Shia, whose centre wasn't in Iran at that time. The main change occurred in the beginning of the 16th century, when Ismail I founded the Safavid dynasty and initiated a religious policy to recognize Shi'a Islam as the official religion of the Safavid Empire, and the fact that modern Iran remains an officially Shi'ite state is a direct result of Ismail's actions. According to Mortaza Motahhari the majority of Iranian scholars and masses remained Sunni until the time of the Safavids.