Michelle got the unexpected makeover from the Iranian Fars News Agency that added sleeves and a neck to her sleek metallic gown, a creation of eminent Indian-American designer Naeem Khan, by photo editing.
Obama made a surprise appearance at the Oscars to present the Academy award for best picture to "Argo" Sunday night via a live feed from the White House Governors Ball.
The First Lady's silver dress by designer Khan had thin straps and a scoop neckline, the New York Daily News reported.
The photo was apparently edited to better comply with the strict Islamic dress code for women.
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The fashion makeover was first reported by the blog Persian Letters.
The Best Picture winner "Argo" tells the story of a CIA operative's bold plot to rescue American diplomats during the 1979 hostage crisis.
Iran has dismissed the Oscar-winning film "Argo" as an "advertisement for the CIA" and some Iranians called the award a political statement by America for its unflattering portrayal of the aftermath of the 1979 Islamic Revolution in the country.
The Mumbai-born designer's client list boasts of celebrities including Beyonce, Carrie Underwood, Eva Longoria, Leighton Meester and Brooke Shields.