According to Iranian state media, Azerbaijan closed the office of Iran's Supreme Leader Ali Khamenei's representative in Baku on Tuesday.
The mosque and office of Ali-Akbar Ojaghnejad were closed down by Azeri authorities, according to the semi-official Tasnim news agency.
In the last week, tensions between Tehran and Baku have escalated.
Last week, Azeri President Ilham Aliyev slammed Iran for conducting military drills near his country's borders.
“Every country can carry out any military drill on its own territory. It’s their sovereign right. But why now, and why on our border?” Aliyev said in an interview published Monday with Turkey’s state-run Anadolu news agency.
Iran responded by saying the manoeuvres near the Azerbaijani border were a "question of sovereignty."
The Iranian army began military exercises along the country's border with Azerbaijan on Friday, despite Aliyev's concerns.
A 700-kilometer border separates Iran and Azerbaijan (430 miles).
Iran is concerned about Azerbaijan's ties with Israel, which is a key weaponry supplier to Baku. Tehran is particularly concerned about separatist sentiments among its ethnic Azeri population being stoked by nationalists in Turkey and Azerbaijan.