Karim Ansarifard scored the opener for Iran in the 53rd minute when he picked the ball up on the edge of the box and fired past the Malaysian goalkeeper.
Iranian defender Jalal Hosseini doubled the advantage seven minutes later before Amir Sharafi added a third.
Malaysia scored a consolation goal from the penalty spot four minutes from time to deny the Iranian side a clean sheet.
"Malaysia was defending with about eight defenders and it was hard to score in this way, but in the second half we could score by changing our tactics," Iran's coach Amir Hossien Peyrovani said.
Iran now plays Oman for a place in the semifinal after Oman overran Hong Kong 3-0 on Monday.
Four-time champion Iran won the competition in 1974, 1990, 1998 and 2002 but missed the title in the 2006 Asian Games in Doha when Qatar claimed the title.