The city was part of the historic region of Sistan (Persian: سیستان), situated today on the borders of southeastern Iran and southwestern Afghanistan. One portion is part of the Iranian province of Sistan and Baluchestan. The other portion is part of the Nimruz Province of Afghanistan.
Sistan derives its name from 'Sakastan', which Sistan was once the westernmost part of. The Sakas that were once native to Sistan were driven to the Punjab during the Arsacid era (63 BCE-220 CE). The Saffarids (861-1003 CE), one of the early Iranian dynasties of the Islamic era, were originally rulers of Sistan.
In the Shahnameh, Sistan is also referred to as Zabulistan, after Zabol, a city in the region. In Ferdowsi's epic, Zabulistan is in turn described to be the homeland of the mythological hero-king Rostam.
Before the rise of Reza Shah Pahlavi in 1923 the city of Zahedan was known as Dozz-aap. This in turn is derived from Persian Dozd-aab, literarily mean "water thief." This is the name given to a sandy land formation that quickly swallows up any water that falls on it, be it rain or irrigation water. The name was changed into Zahedan by the Academy of Culture (Farhangistan) set up during the reign of Reza Shah Pahlavi in the 1930s which changed a myriad of toponyms in Iran. This included the very name of country that was known to the Western World as Persia until 1935. There is folk theory stating that the current name, Zahedan ("Sages," or "pious people" in Persian) was given to the city upon its visit by Reza Shah. The story maintains that upon arrival in the city, the King noticed many Sikhs among the inhabitants of the city. By their traditional appearances, the King misinterpreted the inhabitants as being devout people. The Sikhs were not many, but immigrants occupied in the trade business and therefore visible in the city.
Zahedan and the area of Sistan has a very strong connection with Zoroastrianism and during Sassanid times Lake Hamun was one of two pilgrimage sites for followers of that religion. In Zoroastrian tradition, the lake is the keeper of Zoroaster's seed and just before the final renovation of the world, three maidens will enter the lake, each then giving birth to the saoshyans who will be the saviours of mankind at the final renovation of the world.
Zahedan Lies on east of the "Kavir-e Loot" desert,
Zahedan is the main economic center of the region and home to many small- and medium-scale industries. Its main products include cotton textiles, woven and hand-knotted rugs, ceramics, processed foods, livestock feed, processed hides, milled rice, bricks, and reed mats and baskets.
Shiye mosque: Like most Iranian cities, Zahedan has a Friday mosque for shiye, "Jame mosque", where many members of the community gather to worship on Friday.
Zahedan also has a Sikh Guradwara.
A colorful bazaar, "Rasouli Bazaar" can also be found in the city, where Baluchi and Pashtun traders intermingle. About 100 km south of Zahedan is an intermittently active volcano, "Taftan", which rises abruptly 4,042 m from the surrounding plain. Although the surrounding area has some ancient sites, Zahedan has developed only in the 20th century. Before being chosen as the provincial administrative center in the 1930s, Zahedan was a small village. Its population reached 17,500 by 1956 and increased more than fivefold to 93,000 by 1976. After 1980 large numbers of refugees fleeing the invasion of Afghanistan by the Union of Soviet Socialist Republics (USSR) helped to triple the population of Zahedan to more than 281,000 by 1986, and now It has a population of 590,125 (2001 estimate).
A broad gauge railway line runs from Zahedan to Quetta, and a standard gauge line is being built from Zahedan to Kerman in central Iran, linking with the rest of the Iranian rail network. On May 18, 2007, a MOU for rail cooperation was signed by Pakistan and Iran under which the line will be completed by December 2008. When the rail systems link up at Zahedan, there will be a break of gauge between the Islamic Republic of Iran Railways standard gauge tracks and Pakistan Railways broad gauge.
Zahedan is also served by Zahedan International Airport.