On Saturday, thousands of opposition protesters had spilled on to the streets, undaunted by a warning from Ayatollah Ali Khamenei, Iran's supreme leader, not to continue demonstrations.
Security forces responded with live rounds, batons and tear gas, with the pandemonium continued well into the night.
Witnesses said that dozens of people were hospitalised after being beaten by police and the pro-government Basiji militia in the capital.
Reports on community-driven websites such as Twitter claim some protesters were killed in the clashes, but Al Jazeera has been unable to verify those reports due to an official ban on independent reporting in the capital.
The Iranian government has admitted to the deaths of at least seven people since the June 12 election.
As the clashes took place, a suspected suicide bomber blew himself up outside the shrine of Ayatollah Ruhollah Khomeini, the leader of the Islamic revolution in 1979, injuring at least two people, local news agencies reported.
Government-run television also said members of the exiled Mujahideen Khalq opposition group were arrested in connection with Saturday's unrest.
The report claimed they were acting under British influence.
Mir Hossein Mousavi, the defeated reformist candidate who says the election was stolen by Mahmoud Ahmadinejad, the incumbent president, meanwhile, has repeated his demand for the poll results to be annulled.
"If this huge volume of cheating and changing the votes ... which has hurt people's trust, is presented as the very evidence of the lack of cheating, then it will butcher the republican aspect of the system and the idea that Islam is incompatible with a republic will be proven," he said in a statement posted on the website of his Kalemeh newspaper.
Barack Obama, the US president, urged Tehran to allow Mousavi's supporters to stage peaceful protests and called for an end to the violence.
"The Iranian government must understand that the world is watching," he said.
"We mourn each and every innocent life that is lost. We call on the Iranian government to stop all violent and unjust actions against its own people."
Iran's government has repeatedly denied accusations of election fraud.
The contested result gave Ahmadinejad a tally of about 63 per cent, to Mousavi's 34 per cent.
Iran's highest legislative body, the Guardian Council, has said offered a partial recount of ballots in order to appease protesters.
"Although there is no legal duty on us, we are ready to recount 10 per cent of the whole ballot boxes around the country randomly with presence of the respected representatives of the candidates," Abbas Ali Kadkhodaei, a spokesman for the council said on Saturday.
However, it was unclear whether that would be enough to end the more than a week of protests, with fresh calls being made for a general strike on Sunday.