Chaharshanbe Soori is held annually on the last Wednesday evening before the spring holiday of Nowrouz, which starts on March 20.
Iranians traditionally jump over fires and light fireworks to celebrate the event, with many suffering burns resulting in hospitalisation.
Iran has been scrambling to contain the new coronavirus outbreak which has killed 853 people and infected close to 15,000 since last month, according to government figures.
"Any gathering on the occasion of Chaharshanbe Soori is prohibited and the police will forcefully confront those who do" gather, state news agency IRNA quoted Tehran''s police chief General Hossein Rahimi as saying on Monday.
Another Tehran police official, Keyvan Zahiri, called on people to stay at home during the festival.
"Those who go out can be infected with the coronavirus and make things harder for themselves and their families," he was quoted as saying by IRNA.
The move included the prohibition of lighting fires and setting off fireworks, he added.
Authorities in other provinces such as Isfahan, Golestan and Khuzestan had also cautioned people against observing the festival, according to the news agency.
The Islamic republic has closed key Shiite pilgrimage sites, shut schools and postponed cultural and sports events to stop the outbreak.
It has also discouraged travel ahead of the New Year holidays, cancelled the main weekly Friday prayers and postponed the second round of legislative elections. (AFP) AMS