Several hundred angry Iranians hurled stones and fire bombs and were forced back by police with tear gas.
The anti-Danish protests have been repeated across the Muslim world, and have led to at least five deaths in Afghanistan and one in Somalia.
Many Muslims are angry at the publishing of cartoons of Muhammad in a Danish paper.
Islamic tradition explicitly prohibits images of Allah and the Prophet Muhammad.
The cartoons published in Denmark's Jyllands-Posten, and since reprinted in Norway and other European countries, included an image portraying Muhammad with a bomb in his turban.
Shops and businesses across Indian-administered Kashmir close after a general strike is called in protest at the drawings.
On Monday evening a crowd of about 400 demonstrators bore down on the Danish embassy in Tehran, which Denmark had closed the day before.
They burned Danish flags and chanted "Death to Denmark".
30 Sept 2005: Danish paper publishes cartoons
20 Oct: Muslim ambassadors complain to Danish PM
10 Jan 2006: Norwegian publication reprints cartoons
26 Jan: Saudi Arabia recalls its ambassador
30 Jan: Gunmen raid EU's Gaza office demanding apology
31 Jan: Danish paper apologises
1 Feb: Papers in France, Germany, Italy and Spain reprint cartoons
4 Feb: Syrians attack Danish and Norwegian embassies in Damascus
5 Feb: Protesters sack Danish embassy in Beirut
The embassy gate and two trees caught fire, before Iranian police intervened, forcing the protesters back with tear gas.
At least nine protesters were hurt, police said.
Denmark's foreign minister, Per Stig Moeller, told a Danish radio station that he would hold Iran responsible for any damage to the embassy, and was asking for security guarantees for its citizens still in the country.
But Mr Moeller said he could do little about the trade embargo, under which Iran has banned all Danish imports as well as any other business dealings.
Iran currently imports $280m (£160m) worth of goods from Denmark each year. That works out at about 0.3% of Denmark's total exports.
Some 200 protesters took to the streets in the Afghan capital Kabul
Denmark's embassies in Damascus, Syria, and Beirut, Lebanon were set on fire by protesters at the weekend.
Earlier on Monday protesters attacked the Austrian embassy in Tehran, breaking windows and starting small fires. Austria is the current president of the European Union.
Tehran has already recalled its ambassador to Denmark and has also summoned the ambassadors of Denmark, Norway and Austria to express its anger.
The offending cartoons first appeared in a Danish newspaper last September.
Last week the row escalated after a number of European newspapers republished the pictures, saying they were defending freedom of expression.