India is looking at doubling oil imports from the Persian Gulf nation, which a few years back was its second-biggest oil supplier, as well as getting rights to develop a giant gas field.
Also on cards is a deal on developing the Chabahar port.
"At the invitation of the President of the Islamic Republic of Iran, Dr Hassan Rouhani, Prime Minister Narendra Modi will pay an official visit to Iran on May 22-23, 2016," the Ministry of External Affairs said announcing the visit.
During the visit, PM Modi will call on the Supreme Leader of Iran and will hold talks on a wide range of subjects of mutual interest with Dr Rouhani.
Post-sanctions Iran has seen a flurry of diplomatic and business activity with leaders from China to Russia courting Tehran.
In the run-up to PM Modi's visit, Road Transport and Highways Minister Nitin Gadkari, Oil Minister Dharmendra Pradhan and External Affairs Minister Sushma Swaraj had visited Tehran.
"India and Iran share longstanding civilisational ties. Iran is situated in India's extended neighbourhood and the two countries have significant overlap in their economic and security space. The visit of Prime Minister to Iran will seek to build on these commonalities by focussing on specific cooperation in regional connectivity and infrastructure, developing energy partnership, boosting bilateral trade, facilitating people-to-people interaction in various spheres and promoting peace and stability in the region," the MEA statement said.
The visit, it said, will provide thrust to expand bilateral cooperation and "mutually benefit from new opportunities in the wake of lifting of secondary sanctions against Iran earlier this year."