The move also underscores the widening gaps between Western countries' attempts to isolate and punish Iran and Tehran's efforts to forge closer ties with energy-hungry Asian trading partners such as India and Pakistan to counter Western sanctions.
Iran's recent push to bolster and redefine its links with Asia makes the break with Canada a less serious blow to Tehran than it would have been years ago.
Foreign Affairs Minister John Baird said that the Canadian Embassy in Tehran would close immediately and Iranian diplomats in Canada have been given five days to leave.
A spokesman for Iran's foreign ministry, Ramin Mehmanparast, called Canada's decision "hasty and extreme" and said that Iran would soon respond, the semiofficial Fars news agency reported.
A note in Persian posted on the door of Iran's embassy in Ottawa read: "Because of the hostile decision by the government of Canada, the embassy of the Islamic Republic of Iran in Ottawa is closed and has no choice but to stop providing any consular services for its dear citizens."
Baird said Canada was officially designating Iran a state sponsor of terrorism and gave a long list of reasons for Canada's decision, including Tehran's support for Syria's embattled President Bashar al-Assad in that country's civil war.
"The Iranian regime is providing increasing military assistance to the Assad regime; it refuses to comply with U.N. resolutions pertaining to its nuclear program; it routinely threatens the existence of Israel and engages in racist anti-Semitic rhetoric and incitement to genocide," Baird said in a statement. "It is among the world's worst violators of human rights; and it shelters and materially supports terrorist groups."
Baird said he also was worried about the safety of diplomats in Tehran following attacks on the British embassy.
Britain downgraded ties with Iran following an attack on its embassy in Tehran in November 2011, which it insists was sanctioned by the Islamic Republic's ruling elite. After the attack, Britain pulled all of its diplomats out of Iran and expelled Iranian diplomats from U.K. soil.