In addition to examining the impact of individual and contextual factors on the recent changes in the fertility behavior of women in Iran, this article assesses the role of unobserved heterogeneity (or unobserved characteristics of women) in explaining these changes. The study applies event history analysis (discrete time hazard model) to the data from the 2000 Iran Demographic and Health Survey (individual level variables) which is linked to the data from the 1986 and 1996 Iranian censuses (time-varying contextual level variables). The methodological findings show no effect of unobserved heterogeneity on fertility behavior (progression to second and third conceptions), suggesting the dominant role of variables included in the analysis compared to those omitted from the analysis due to data limitation. The findings regarding the social, economic and cultural correlates of fertility suggest that the recent decline in progression to second and third conceptions can be explained by improvements in women's education and reductions in child mortality (at the individual level) as well as the expansion of education for children (at the contextual level). In addition, adjusting for socio-economic factors at both the individual and contextual levels nearly totally removed fertility differences among ethnic-predominated regions, suggesting these differences are highly related to socio-economic differences among these regions.