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At least 19 Navy personnel were killed and 15 others were injured in the accident involving the 'Konarak' support warship, the Iranian Navy said on Monday (local time).
The Iranian vessel met with an accident during a military drill in the waters of Jask Port in southern Iran, reported IRNA.
As per reports, the vessel was mistakenly hit by a missile during the drills, since it was located too close to the intended target.
The Navy said that rescue and relief operations began soon after the mishap and the injured persons were evacuated and sent to medical centres.
Those injured are in 'satisfactory' conditions, added the Navy.
The incident comes in the wake of heightened tensions as the United States-Iran relations continue to deteriorate.
The tensions worsened sharply after Iranian military commander Qassem Soleimani was assassinated by the US in January earlier this year.
Iran responded to his assassination by firing missiles at bases in Iraq.