The election carries added significance since the next president will influence Iran's negotiations with the West over its nuclear program, and will have a say about the nation's role as a patron of the Shiite Muslim majority in neighboring Iraq.
None of the seven candidates is expected to get the 50 percent support needed to win outright, meaning the two top vote-getters will likely meet in a runoff. Iran's previous presidential elections after the revolution were all won in the first round.
The front-runner in Friday's vote is cleric Hashemi Rafsanjani, who was president from 1989 to 1997.
On the eve of the vote, President Bush criticized the election as illegitimate, saying it was designed to keep a power in the hands of a few.
"The Iranian people deserve a genuinely democratic system in which elections are honest — and in which their leaders answer to them instead of the other way around," he said in a statement released by the White House.
Hard-line clerics loyal to supreme leader Ayatollah Ali Khamenei have broad powers over Iran's elected leaders and thwarted many of the reforms attempted by the outgoing president.
Nagi Hassani, a 49-year-old shopkeeper from western Tehran, wasn't taking any chances that he might get lost in the voting crowds and turned up to vote one hour before the polling stations opened. He waved his birth certificate at an Associated Press reporter in western Tehran saying "I want to be the first one to vote."
Iran's official television showed long lines outside polling stations but there was no independent indication of the early voter turnout.
Outgoing President Mohammed Khatami disappointed Iran's young, who put him in power in two successive elections, by backing down on promised reforms and buckling to pressure from the hard-liners among Iran's powerful clerics. He told a press conference that he hoped for a high voter turnout and said it would strengthen both stability and democracy in Iran.
"I hope the next president will come with development in mind," he said.
Rafsanjani has portrayed himself as the most experienced figure to handle the sensitive nuclear talks. Washington claims Iran seeks nuclear arms, but Iran say the program is only for energy production.
"I hope we have a fair election, free of manipulation," Rafsanjani said.