There was uproar in parliament, held for the past four years by moderates loyal to President Mohammad Khatami, as it emerged the Guardians' Council had also barred leading pillars of the reform movement - including the brother of the president.
"I consider this rejection of candidates to be an illegal coup d'etat and an act of regime change by non-military means," fumed Mohsen Mirdamadi, head of the parliament's foreign policy and national security commission.
Mirdamadi was one more than 80 incumbent reformist MPs barred from standing in the February 20 election by the 12-member Guardians' Council, an unelected political oversight body and bastion of the religious right.
He said the bulk of disqualified MPs were found to have been in violation of an article in the electoral law stipulating a commitment to Islam and the position of Ayatollah Ali Khamenei as supreme leader.
"It is like in a football match where the referee sends off all the players from one team," commented Vice-President Mohammad Ali Abtahi.
Mohammad Reza Khatami, the president's brother and head of the Islamic Iran Participation Front (IIPF) - the Islamic republic's largest pro-reform party - said "we are heading in the direction of a national election boycott" and warned of dire consequences for Iran's international image.
The Majlis building was later occupied by a group of some 60 reformist MPs for an all-night sit-in. Some of them were disabled war veterans and former prisoners under the regime of the shah.
A senior politician also revealed a group of up to eight cabinet ministers had "prepared their letters of resignation", while all of the country's 27 provincial governors said in an open letter to the president that they would also quit unless the crisis was resolved within a week.
And in a defiant gesture, Iran's interior ministry - the body responsible for organising elections - branded the massive disqualifications "illegal" and warned in a statement they would not be enforced.
The president himself made an impassioned appeal for calm, and said the ruling would be challenged through "legal channels".
"Violence must be averted. We should not do anything to stoke tensions," Khatami said, alluding to fears the latest explosion of reformist-conservative tensions could again bring out pro-reform students already frustrated with the slow pace of reforms on to the streets.
Parliament speaker Mehdi Karoubi said he and the president were in contact with the Guardians Council and Ayatollah Khamenei. He said reformers had several channels and time to reverse the decision before a definitive list is published 10 days before the vote.
"We hope that through negotiations we can obtain the approval of a certain number of rejected candidates, but not all of them," the speaker, a reformer close to the president who has not been barred, told AFP.
The Guardians' Council is a senate-like body that vets all Majlis legislation to see if it complies with Islamic law and the constitution.
According to reports, the number of disqualified candidates numbered up to half of the 8,149 people who registered with the interior ministry last month to stand in the elections.
Also believed to have been rejected were outspoken leftist Mohsen Armin and female MP Elaheh Koulaiee, who is close to Nobel Peace laureate Shirin Ebadi's campaign for women's rights.
Jafar Kambouzia, a reformist MP from the south-eastern city of Zahedan who was also on the blacklist, said the Guardians' Council had simply "rejected all those candidates who could win votes", including the "quasi-total of IIPF candidates across the country".