Some protests were reported as Iran unveiled new foreign exchange rules in a bid to soften the effect of the sanctions set to go into effect at midnight. The new sanctions come after US President Trump ripped up a seven-country nuclear deal in May.
Iranians were bracing for the return of US sanctions against a backdrop of angry protests and a crackdown on corruption which are testing the government of President Hassan Rouhani.
The country has seen days of sporadic protests and strikes in several towns and cities driven by concerns over water shortages, the economy and wider anger at the government's failure to deal with problems.
Journalists reported a heavy build-up of riot police on Sunday night, including at least one armoured personnel carrier, in the town of Karaj, just west of Tehran, that has been a focal point of unrest.
Internet was cut off in the area – part of a concerted effort to block reporting on the unrest which includes restrictions on foreign journalists.
Washington is set to reimpose sanctions at midnight on Tuesday, after President Donald Trump in May ripped up a seven-country nuclear deal from 2015 which eased sanctions on Iran in exchange for Tehran scaling back its nuclear ambitions.
Secretary of State Mike Pompeo vowed Sunday that the US would "enforce the sanctions" and that pressure on Tehran was meant to push back against what he called Iran's "malign activity."
Concern at the US actions has fuelled a run on Iran's currency, which has lost more than half of its value since April. That's increasing concern over already high unemployment, inflation and the government's inability to address popular concerns.
New currency exchange rules
Rouhani is due to give a televised address to the nation on Monday to outline plans for tackling the currency decline and possible further impact of sanctions.
His government unveiled new foreign exchange policies late on Sunday, allowing unlimited, tax-free currency and gold imports, and reopening exchange bureaus after an attempt to lock-in the value of the rial in April fuelled a currency black market.
With senior religious authorities calling for a crackdown on graft, the judiciary said on Sunday it had arrested the vice-governor of the central bank in charge of foreign exchange, Ahmad Araghchi, along with a government clerk and four currency brokers.
Scope of US sanctions and Trump's talk of talks
Sanctions are due to return in two phases on August 7 and November 5 – with the first targeting Iran's access to US banknotes and key industries including cars and carpets.
The second phase – blocking Iran's oil sales – is due to cause more damage, although several countries including China, India and Turkey have indicated they are not willing to entirely cut their Iranian energy purchases.
"This is just about Iranians' dissatisfaction with their own government, and the President is pretty clear, we want the Iranian people to have a strong voice in who their leadership will be," Pompeo said.
After months of trashing Tehran and his predecessor Barack Obama for signing the US up for the 2015 nuclear deal, the US president last week and offered to meet Rouhani without preconditions.
Trump's about face came just days after a bellicose exchange between the two presidents, with Rouhani warning of the "mother of all wars" and Trump responding with a Twitter tirade against Iran's "DEMENTED WORDS OF VIOLENCE."
Key Trump administration figures, including national security adviser John Bolton, have called in the past for the government to be ousted, although the official line is that Washington only wants a change in Tehran's "behaviour."
"For Bolton and others, pressure is an end in and of itself," Suzanne Maloney, deputy director of the foreign policy program at the Brookings Institution, said.
"If it leads to a wholesale capitulation fine, if it leads to regime change, even better."
There have been ongoing rumours that Trump and Rouhani could meet in New York later this month, when they are scheduled to attend the UN General Assembly – though Rouhani reportedly rejected US overtures for a meeting at last year's event.
Over the weekend Trump once again floated the idea of a meeting, tweeting "I will meet, or not meet, it doesn't matter – it is up to them!"
"Iran, and its economy, is going very bad, and fast!" he added.
Trump has stated he wants a new deal with Iran that goes beyond curbing its nuclear programme, and ends what America calls Tehran's "malign influence" in the region, including its support for Syrian President Bashar al Assad and threats to shut down the strategic Strait of Hormuz, a vital shipping lane for international oil supplies.
European countries say they remain committed to the 2015 nuclear agreement, which Russia and China also signed up for, seeing it as the surest way to safeguard their regional security, including in Europe.
"The problem is: What next?" one of the European diplomats said, referring to concerns that the US is eyeing an end to Iran's system of governance as the end goal of the sanctions.
If the reimposed sanctions caused the government in Tehran to collapse, Iran would likely devolve into civil war like what unfolded in Syria or radicals would assume power, the diplomat said, speaking on condition of anonymity.
Europe also fears that a deepening of Iran's economic crisis could also lead to an influx of refugees and migrants into Europe like that seen on the heels of the Syrian conflict.
"Iran will be forced to make a choice: either fight to keep its economy off life support at home or keep squandering precious wealth on fights abroad. It will not have the resources to do both," Pompeo said in May.
Supporters of the Iran agreement have long argued that the US departure would alienate European allies who partnered with the US in the negotiations.
We "remain firmly committed to ensuring [the deal] is upheld and we continue to abide by our commitments," said another European diplomat, also speaking on condition of anonymity.