Dieter Zetsche says Daimler must review its relationship with Iran
Daimler is to divest its 30% stake in an engine company in Iran as part of a wider review of links to the country.
The German carmaker's chief executive, Dieter Zetsche, said Tehran's political policies were behind the move.
"In view of the current political situation we have... extensively reassessed this business relationship," Mr Zetsche said.
Companies in Europe and America have faced pressure to review their Iran links because of its nuclear plans.
Mr Zetsche made no mention of Iran's nuclear development programme in his speech at Daimler's annual shareholder meeting.
But he said: "The policies of the current Iranian leadership have compelled us to put our business relationship with that country on a new footing. None of these measures are directed against the Iranian people."
He said Daimler had withdrawn its application to export commercial vehicles for civilian use in Iran.
The company's business activities in Iran will be "limited" to meeting existing contractual obligations, Mr Zetsche said.
Daimler's interests in the country include 30% of Iranian Diesel Engine Manufacturing, a subsidiary of Iranian Khodro Diesel.
In the US, the Obama administration is trying to secure international agreement for tougher sanctions against what it considers to be a nuclear power in the making.
Diplomatic pressure was thought to be behind a decision last month by Lukoil, the Russian oil company, to abandon a project in Iran.
Europe's largest oil and gas company, Royal Dutch Shell, and Ingersoll Rand, the US industrial group, have shelved plans to invest in the Islamic Republic pending a decision on sanctions.