Iranian authorities said that it would shelve a 2012 law excluding women from volleyball matches during the four-day tournament held on the resort Kish Island.
"From now on women can watch beach volleyball matches in Kish if they observe Islamic rules," said Kasra Ghafouri, acting director of Iran's Beach Volleyball Organisation, according to Human Rights Watch.
Small crowds of women spectators were spotted in the stands for the tournament.
The move comes after women's rights' activists and Human Rights Watch appealed to the international volleyball authority to bar Iran from hosting any tournaments until women are allowed into stadiums.
Iran's decision, under mounting pressure, to allow women to attend was a small but significant victory for activists after years of campaigning.
"The Iranian authorities' decision to allow women to attend the Kish Island beach volleyball tournament is a step in the right direction," said Minky Worden, director of global initiatives at Human Rights Watch.
"It shows that sports federations like the FIVB have the power to enforce the basic requirement that all countries have to play by the rules and that they don't get a pass on discriminating against and excluding women."
Women have been arrested and imprisoned for illegally attending volleyball matches in the past five years.
Iranian-British Ghoncheh Ghavami was re-arrested by authorities for attending a world volleyball tournament in Tehran for "propaganda". She spent five months in the notorious Evin Prison, including a spell in solitary confinement.
Campaigners have said that although they were happy to see women at matches in the more liberally administered Kish Island, the real test will come in June when the world championship will be held in the Iranian capital.
"Iranian women should be able to enter stadiums as freely as their brothers or husbands," a leader of OpenStadiums told Human Rights Watch, using a pseudonym for fear of retaliation.
"This small but important step at Kish Island can and should lead to more open spaces and opportunities for women and girls in Iran."