The paper was closed for failing to replace a managing director accused of publishing blasphemy and insulting officials, IRNA, the state news agency said.
The Supervisory Board on the Press – run by the culture ministry – said Sharg had been given one month to replace Mohammad Rahmanian, but after the deadline ran out on Sunday he remained at the helm.
The order had reportedly also come after 70 warnings for publishing “heretical articles, insulting religious, political and national figures and revealing information in defiance of the Supreme National Security Council”.
The board also criticised a cartoon published on Thursday, which depicted a chess-board lying between a horse and a donkey with a halo of light around its head.
Some opposition websites have quoted Mahmoud Ahmadinejad, the Iranian president, as saying that he was protected by a divine circle of light during his UN assembly speech in New York last year.
The president’s office strongly denied he had said such a thing.
Rahmanian said he would protest the “illegal” ban.
“Reacting to a cartoon is not the press watchdog’s job and cannot shut down a paper for this reason,” he told the student ISNA news agency, insisting “the court has to decide on that”.
With a circulation of 100,000, Sharg (which means East in Farsi) is a leading publication among some 40 national dailies, half of which are close to the moderate and reformist camps.
Some reformist journalists have said the aim of the Sharq’s closure was to silence other critics, adding they had no hope that the ban would be lifted soon.
“The closure of the Sharq daily has a message. Do not criticise the government,” said a leading reformist journalist, who asked not to be named.
The Iranian government has said it has no intention of censoring the media, but moderate publications have recently been under attack.
In August the government urged the judiciary to clamp down on dailies that spread “lies”.