Islamic State's Amaq agency has posted a video of three men in a vehicle who it said were on their way to carry out an attack on an Iranian military parade, which killed at least 25 and wounded 60 others. "But they are linked to America and Mossad", Israel's intelligence agency.
AFP reporters saw members of the public and the military carrying coffins draped in the Iranian flag, some bearing pictures of the deceased.
Officials and an eyewitness said the four gunmen who carried out the attack were clad in Iranian military uniforms and had sprayed the crowd with gunfire using weapons they had stashed in a nearby park.
Footage on social media showed soldiers and bystanders scattering as shooting broke out at the parade in Ahvaz marking the 38th anniversary of Iraq's 1980 invasion of Iran. Women, children and a disabled war veteran were also among the victims, officials said. Iran holds regional terror sponsors and their U.S. masters accountable for such attacks.
Saturday's assault, one of the worst against the most powerful force of the Islamic Republic, struck a blow at its security establishment at a time when the U.S. and its Gulf allies are working to isolate Tehran.
Shi'ite Iran is at odds with Western-allied Sunni Muslim Saudi Arabia for predominance in the Middle East.
Iran has intervened in the wars in Syria and Iraq and plays an influential role in Yemen, but this was a rare attack on its own soil.
However, Iran is rejecting calls to give up its missiles despite strong pressure from the U.S.in the form of sanctions.
At Monday's funeral ceremony in Ahvaz, Intelligence Minister Mahmoud Alavai announced that many suspect involved in the attack have been identified and "a majority of them were detained". He did not elaborate.
A man wearing a baseball cap emblazoned with what appears to be a Revolutionary Guard logo discussed the impending attack in Farsi in the video.
"We will never decrease our defensive capabilities... we will increase them day by day", Rouhani said at a military parade.
"It is expected that (the Danish and Dutch) governments hand over the perpetrators of this attack and anyone related to them to Iran for a fair trial", he added.
The Islamic Revolutionary Guards Corps (IRGC) was set up after the 1979 Islamic Revolution to protect the Shi'ite clerical ruling system and revolutionary values.
"The individuals who fired at the people and the armed forces during the parade are connected to the al-Ahvaziya group which is fed by Saudi Arabia", Sharif said.
This combination of two pictures shows U.S. President Donald Trump, left, on July 22, 2018, and Iranian President Hassan Rouhani on February 6, 2018.
General Ramadan Sharif told the semi-official Iranian Students' News Agency the attackers were from the separatist Ahvaz Movement, which seeks to establish an independent Arab state in Khuzestan province, where the attack took place.
Iran's Supreme Leader, Ayatollah Khamenei, has accused "regional states that are puppets of the US", while a spokesman for the armed forces said the gunmen were trained by two Gulf Arab states with links to the USA and Israel.