"Two homemade bombs exploded in rubbish bins in a very busy street and killed four and wounded 90" on Saturday, said an Iranian official, in charge of political and security matters in Khuzestan province.
"The two bombs went off in Naderi Avenue, a very popular street. They were terrorist actions," he added.
Television footage showed burnt out cars and shattered shops, as well as blood on the road. The government-owned Arabic-language Al-Alam channel, which spoke of a single bomb, said it could have been one placed in a Peugeot car.
It said three people were injured, although other state television news broadcasts suggested the number of people hurt could be much higher. Some put the number of wounded at 90.
The blasts occurred shortly before dusk, when shoppers were crowding commercial areas to buy food for iftar (the meal to break the daily fast during the Muslim holy month of Ramadan).
The blasts coincided with a constitutional referendum in neighbouring Iraq.
Ahvaz is the capital of the oil-rich province of Khuzestan, situated close to the border with Iraq and dominated by ethnic Arabs.
The area has been the scene of unrest in recent months, and on 12 June, prior to Iran's presidential elections, a string of car bombs killed eight people and wounded 90.
Three Arab separatist groups claimed responsibility, although some Iranian politicians and newspapers went on to point the finger at British soldiers based just across the border in Basra.
Last week, the British embassy in Tehran angrily denied what it called the incorrect and irresponsible claims.