Iran's Deputy Culture Minister and head of the cinema agency Javad Shamaghdari said Iran should "avoid" the Hollywood festival.
He urged the committee in charge of selecting Iran's choice to take a step back.
The committee, which works under the cinema agency, already picked "Ye Habbeh Ghand," or "A Cube of Sugar" - a film about a family wedding turning into a funeral when the groom's relative dies - to run for best foreign film.
The government has still to endorse the selection for it to become official.
Meantime, Iran's Culture Minister Mohammad Hosseini said Monday that his country will boycott the 2013 Oscars in the wake of the anti-Islam film, "Innocence of Muslims".
Hosseini said the Islamic Republic would not field an entry for next year's awards due to the anti-Islam movie which levels "intolerable insults to the Prophet of Islam". Hosseini urged other Islamic countries to also boycott.
An Iranian film won an Oscar in the foreign film category in February.
Iranian director Asghar Farhadi won the 2012 Oscar for best foreign film for his movie, "A Separation" - the first such prize for Iran.
Tehran officialdom welcomed the Oscar, especially as Farhadi beat an Israeli film and three others in the foreign language category, describing it as a conquest for Iranian culture and a blow for Israel's perceived outsized influence in America.
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