An agreement on the construction of the strategic route was signed by Armenia's Sargsyan and his Iranian counterpart, Hamed Behbahani, on April 14 in Tehran. A working group will take about three months to carry out a feasibility study.
"In addition, Armenia is in negotiations with the Asian Development Bank, the World Bank and other concerned parties," Sargsyan told journalists.
The construction of the 500-kilometer (310-mile) railway, with 60 kilometers (37 miles) in Iranian territory, is expected to take at least five years and cost $1.5-$1.8 billion.
The railway, with the Armenian section connecting the northern city of Sevan to the southern city of Meghri on the border with Iran, will ensure the transportation of energy supplies and other goods, and increase trade between the countries.
Landlocked Armenia, currently under economic blockade by Turkey and Azerbaijan, has rail links with other countries only through the territory of Georgia, which is complicated by Tbilisi's often fractious relations with Moscow.
Russia and Ukraine have expressed interest in financing the project.