The notorious "Evin" in Tehran will be turned into a university building, the Iranian government announced, quoted by DPA and BTA.
"By turning the prison into an academic center, we will send a good signal and a conciliatory message to the world community," said Vice President Mohammad Reza Aref, quoted by ISNA news agency.
The prison has been known for decades as a site of serious human rights violations against political dissidents. He will become part of the medical faculty of the nearby Shahid Beheshti University.
Reformers in Iran have campaigned for years to close the prison, but hardline officials in the country's parliament and judiciary have blocked the move.
The project will now be carried out under the leadership of the moderate new president Massoud Pezeshkian.