MPs approved the establishment of the "Organisation of Targeted Subsidies" to be responsible for spending the extra income generated from the phased out subsidies.
Approval must be finalised by the Guardians Council, Iran's legislative oversight body.
The performance of the new government agency will be examined by parliament as well as the state Audit Organisation every six months.
Direct and indirect subsidies on goods cost the Iranian government as much as 100 billion dollars a year.
Currently Iran's petrol stations sell both domestically made and imported unleaded petrol at 1,000 rials per litre (10 US cents) and charge 1,500 rials per litre (15 US cents) for higher-quality super unleaded petrol.
Electricity costs just six cents per 10 kilowatt hours.
The lifting of subsidies will take place in a staged process, and is due to be concluded by the end of the country's fifth five-year development plan in March 2015.
Economists have warned about the inflationary effects of the plan which will push up the cost of staples and transportation.
According to Iran's central bank, the year-on-year inflation stood at 15 percent at the end of November.
The price of petrol, kerosene, LPG, gasoil and other oil derivatives will be gradually adjusted based on Gulf prices, and by March 2015 Iran plans to raise its fuel prices to no less than 90 percent of Gulf prices.
President Mahmoud Ahamadinejad, criticised for his expansionary and populist policies, said in 2008 that 60 percent of the money saved from the plan would be used to boost the spending power of people on low and middle incomes.
