United States support for Ba'athist Iraq during the Iran–Iraq War, in which it fought against post-revolutionary Iran, included several billion dollars' worth of economic aid, the sale of dual-use technology, military intelligence, and special operations training. The U.S. refused to sell arms to Iraq directly due to Iraq's ties to Palestinian groups which the U.S. designates as terrorist organizations such as the Palestinian Liberation Front and Abu Nidal Organization, but several sales of "dual-use" technology have been documented; notably, Iraq purchased 45 Bell helicopters for $200 million in 1985. Of particular interest for contemporary Iran–United States relations are accusations that the U.S. government actively encouraged Iraqi leader Saddam Hussein to invade Iran, supported by a considerable amount of circumstantial evidence and generally regarded as the conventional wisdom in the Arab world, but several scholars and former U.S. government officials deny that any such collusion occurred, and no direct documentary proof of it has been found.

The Iran hostage crisis was a diplomatic standoff between Iran and the United States. Fifty-three American diplomats and citizens were held hostage after a group of militarized Iranian college students belonging to the Muslim Student Followers of the Imam's Line, who supported the Iranian Revolution, including Hossein Dehghan, Mohammad Ali Jafari and Mohammad Bagheri, took over the U.S. Embassy in Tehran and took them as hostages. The hostages were held for 444 days, from November 4, 1979 to their release on January 20, 1981. The crisis is considered a pivotal episode in the history of Iran–United States relations.