"The accident took place around 2.40 in the morning ... It seems that the driver fell asleep, causing the accident. Sixteen Iraqis were killed and 20 others wounded, some seriously," a police official in Iran's western province of Lorestan said.
Many Iraqis travel to Iran on pilgrimage, particularly to visit the Muslim Shiite holy cities of Qom and Mashhad.
Last week, 44 people were killed and 39 wounded in a collision between two buses that then caught fire on the highway connecting Qom and Tehran, the most serious road accident in the country in years.
During the past two years, however, the number of road deaths has dropped to around 20,000 per annum despite the number of cars on the roads rising to 17 million.
A strong police presence on the roads and a steep rise in fines for dangerous driving has helped to cut the number of deadly accidents.