In taking the Mujahedin-e-Khalq, or MEK, off the list, the Conservative government is following the lead of the United States and the European Union.
The Conservatives provided no reasons for delisting the MEK, or for opting to keep 43 others on the list.
The Islamic Revolutionary Guard Corps' Qods Force, the secret branch of Iran's Islamic Revolutionary Guard Corps, was also added to the roster.
The MEK, once an armed faction, now says it wants to replace Tehran's clerical regime with a secular government through peaceful means.
In delisting the MEK in September, the United States noted the group had not engaged in terrorism for more than a decade.
Any person or group on Canada's terrorist list may have their assets seized, and there are criminal penalties for assisting listed entities with the aim of helping them carry out extremist activities.
Canada initially listed the Iraq-based MEK in May 2005, noting the group's objective was to install a new government in Tehran under the National Council of Resistance of Iran, a political coalition of opposition groups.
"To achieve their objectives, the MEK has used physical force, including armed attacks," said the federal listing.
The MEK's roots stretch back to its days as a guerrilla force that helped overthrow the Shah of Iran in 1979. Following a break with the new leadership of the Islamic Republic, it aided Saddam in his eight-year war with Iran in the 1980s.Suggest a correction