At least 10 were killed when gunmen opened fire on people from behind a viewing stand at Qods Boulevard of Ahvaz during the morning parade held to mark the former Iraqi dictator Saddam Hussein's invasion of Iran in the 1980s.
Iranian state television quoted a spokesman for Iran's Revolutionary Guard Corps as saying that the attackers were affiliated with an Arab separatist group in the region.
Iran is marking the anniversary of the beginning of the 1980-88 war with Iraq with several parades across the nation.
Four militants carried out the attack and two of them were killed, according to ISNA.
Nine of those killed are reported to be members of Iran's Revolutionary Guard Corp, the semi-official ISNA news agency said.
Foreign minister Mohammed Javad Zarif has blamed the attack on "regional terror sponsors".
A video on state television's website showed confused soldiers at the scene of the attack.More news: Aurora Cannabis CEO Booth says Coca-Cola would be a great partner
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The IRNA report said those wounded in the attack Saturday included a woman and a child.
Iran's state-run IRNA news agency says 20 people have been wounded in an attack on military parade in Ahvaz.
A state TV report said the assailants were "Takifiri gunmen", a term sometimes used to describe Islamic State. However, those groups in the past previously have only attacked unguarded oil pipelines at night.
At that point it marked the only attack by the Sunni extremists inside of Shia Iran, which has been deeply involved in the wars in Iraq and Syria, where the militants once held vast territory. In it, paramedics could be seen helping someone in military fatigues laying on the ground.
Ahvaz is the capital of Iran's oil-rich Khuzestan province.