Etymology of Iran
The term "Iran" derives immediately from Middle Persian Ērān, Pahlavi ʼyrʼn, first attested in an inscription that accompanies the investiture relief of the first Sassanid king Ardashir I at Naqsh-e Rustam. In this inscription, the king's Middle Persian appellation is ardašīr šāhān šāh ērān while in the Parthian language inscription that accompanies the Middle Persian one the king is titled ardašīr šāhān šāh aryān (Pahlavi: ... ʼryʼn) both meaning king of kings of Iranians.
The gentilic ēr- and ary- in ērān/aryān derives from Old Iranian *arya- (Old Persian airya-, Avestan airiia-, etc.), meaning "Aryan," in the sense of "of the Iranians." This term is attested as an ethnic designator in Achaemenid inscriptions and in Zoroastrianism's Avesta tradition, and it seems "very likely" that in Ardashir's inscription ērān still retained this meaning, denoting the people rather than the empire.
Notwithstanding this inscriptional use of ērān to refer to the Iranian peoples, the use of ērān to refer to the empire (and the antonymic anērān to refer to the Roman territories) is also attested by the early Sassanid period. Both ērān and anērān appear in 3rd century calendrical text written by Mani. In an inscription of Ardashir's son and immediate successor, Shapur I "apparently includes in Ērān regions such as Armenia and the Caucasus which were not inhabited predominantly by Iranians." In Kartir's inscriptions (written thirty years after Shapur's), the high priest includes the same regions (together with Georgia, Albania, Syria and the Pontus) in his list of provinces of the antonymic Anērān. Ērān also features in the names of the towns founded by Sassanid dynasts, for instance in Ērān-xwarrah-šābuhr "Glory of Ērān (of) Shapur". It also appears in the titles of government officers, such as in Ērān-āmārgar "Accountant-General (of) Ērān" or Ērān-dibirbed "Chief Scribe (of) Ērān".
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