Late Antiquity in Iran and Iraq, the core territories of the Sasanian Empire and their Islamic successors, was a period of economic change and transformation. Nowhere can this be seen better than in agriculture and agricultural production. Archaeology, paleobotany, and geological surveys give us ample evidence for a profound change in the agricultural production and its relation to the commercial economy during the period of late antiquity. Increased investment and expansion of the irrigation systems, as well as a shift towards more commercial agriculture instead of subsistence agriculture, aimed at a market economy, seems to be among the most significant markers of this economic transformation. Using a combination of archaeological and paleobotanical evidence, coupled with recently discovered textual evidence, this paper proposes to present a picture of the late antique economy of Iran. Other than the effects of this transformation on the economy of the Sasanian Empire and the relationship between these changes and Sasanian financial policies, it is suggested that the changing economy provided the necessary basis for the establishment of the successful Islamic states that came to replace the Sasanians and dominate the region. Particular attention is given to the economic theories concerned with the rise of “capitalism” in this region, and the Susiana/Deh Luran plains of southwestern Iran are used as “test cases” to demonstrate the process of transformation proposed in the paper.