TDR will build the factory, which is to produce 6.5 billion cigarettes a year, in the northern Iranian town of Sari with the Iranian Tobacco Company as a local partner.
Construction is due to start late 2011 and the plant will serve the southwest Asian market.
TDR said the investment "strengthens its position as one of Croatia's biggest exporters." Overseas sales account for about 50 percent of the company's revenues.
The Iranian factory will produce TDR brands such as "Respect" which is already on the Iranian market but also develop a new brand with its Iranian partner.
In 2008, TDR reported sales of some 300 million euros.
