The quake caused extensive material damage to buildings in the northwestern city. Some villages on the outskirts of Khoy are said to have been destroyed totally.
Several people have so far been confirmed dead.
A large number of people have been injured with some having been taken to hospitals for treatment.
Debris falling around as a result of the tremor also damaged cars in the streets. Many aftershocks have been recorded so far.
Khoy residants are spending the night outdoors in freezing tempreture.
The quake comes 10 days after another strong quake in Khoy which caused some damage but left no deaths.
Iran is criss-crossed by many faultlines, which have made it a quake-prone country.