The wargames come amid reports by Amnesty International that Taleban militiamen in northern Afghani town of Mazar-i-Sharif killed 10 Iranian diplomats last month.
In addition to the Iranian diplomats, Amnesty International reports that the Taleban massacred thousands of ethnic Hazeri civilians when their forces entered the town in August.
Previous conflicting reports as to the fate of the Iranian diplomats had added tension to the already strained relationship between the Taleban and Iran.
Analysts speculated that a confirmation of the diplomats' deaths would inflame tensions along Iran's border with Afghanistan.
Fighters of the purist Islamic movement, which rules about 90 percent of Afghanistan, could not muster sufficient forces to match the 70,000 Iranians engaged in three days of exercises only 40 miles from the Afghan border, according to military analysts.
Revolutionary guards, paratroopers, and commandos using tanks, mock air attacks, and heavy artillery were involved in the war games in northeast Iran, the largest conducted in the region either before or since the 1979 revolution.
Iranian newspapers said on Thursday the bulk of Iran's forces taking part in the exercises would remain in the rugged border area.
Taleban officials have described the Iranian war games as threatening behavior and warned against any escalation of tension on the border.
Iranian Foreign Ministry spokesman Mahmoud Mohammadi said the exercises were a warning to the Taleban.
The Taleban released five Iranian captives on Thursday, but none from Mazar-i-Sharif were among them, and it is suspected they are dead.
The Taleban have a reputation as determined guerrilla fighters who have been largely successful against fractured guerrilla opposition in the country's North.
An Amnesty International statement issued by its international secretariat in London said the group learned of the massacre in Mazar-i-Sharif from "testimonies from eyewitnesses and surviving members of the victims' families."
Along with the Iranian diplomats, Amnesty said "Taleban guards deliberately and systematically killed thousands of ethnic Hazara civilians during the first three days following their military takeover of Mazar-i-Sharif on 8 August 1998."
"Since their arrival in Mazar-i-Sharif [on Aug. 8], the Taleban [forces] have sealed the area to foreign media and independent observers," Amnesty said.
On the Iranian side, it is 10 years since Iran's forces (now mostly conscripts) were last tested in battle in the 1980-88 war with Iraq.
Tehran has refused to recognize the Taleban government in Kabul and considers ousted President Burhanuddin Rabbani as Afghanistan's legitimate leader.
The Iranian government has accused the Taleban of bringing Islam into disrepute.
©1998 CBS Worldwide Corp. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. Reuters contributed to this report