Mr Najib said the firms could take part if they did not contravene regulations
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Malaysia has expelled Iranian defence firms from a military trade fair.
The Malaysian deputy prime minister, Najib Razak, said the firms breached a UN ban on Iranian arms exports.
"They displayed equipment that clearly contravenes the UN resolution, such as missiles and missile systems," he said.
The UN has imposed sanctions against Iran over its refusal to suspend its uranium enrichment programme, which Western powers fear could be used to make weapons.
Iran says the programme is for purely peaceful purposes.
Mr Najib said the Iranian firms had been told that they could take part provided they did not contravene the UN resolutions.
A Malaysian newspaper, the New Straits Times, said US embassy officials had told the Malaysian authorities they were concerned about the Iranian displays at the show in Kuala Lumpur.
"We received some complaints, but we took this action not on the basis of the complaints but because of our position," added Mr Najib.
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