Ahmad Baledi was hospitalized with about 70 percent burns and remains in critical condition, the rights group said.
The report said municipality workers, accompanied by police officers, arrived at the kiosk on Sunday without notice and began demolishing it.
Baledi's wife and son Ahmad staged a sit-in inside the kiosk to try to stop the demolition, but officers continued, Karun said.
The group said the deputy for municipal services in the district “behaved violently” and threw Baledi's wife out of the kiosk.
In protest at what was described as unjust and violent treatment, Ahmad Baledi poured gasoline on himself and set himself on fire in front of the officers.
Witnesses cited by Karun said some of the officers made no effort to stop him and watched with indifference and mockery.
The incident comes amid deepening economic hardship in Iran, where soaring joblessness and inflation have pushed many households into street vending, peddling, and other informal work to survive.
The self-immolation also echoes, in unsettling ways, the act by Tunisian street vendor Mohamed Bouazizi that helped ignite the Arab Spring in 2011.