Mohammad Rasoulof was banned from directing in 2017. He produced There Is No Evil, his sixth film, in secret.
He is unable to travel outside Iran owing to charges relating to his earlier films.
Mr Rasoulof’s daughter Baran, who also stars in the film, received the Golden Bear on his behalf.
Jury president Jeremy Irons said that the film, which tells four stories about the death penalty, showed “the web an authoritarian regime weaves among ordinary people, drawing them towards inhumanity”.
The second-place award at the festival went to Never Rarely Sometimes Always, a film about abortion in the US by director Eliza Hittman.
Addressing a news conference by video call, Mr Rasoulof explained that There Is No Evil was about “people taking responsibility”.
“I wanted to talk about people who push responsibility away from themselves and say that the decision is taken by higher powers,” he said. “But they can actually say no, and that’s their strength.
“The story of each part of the film is based on my own experience,” Mr Rasoulof said in a Skype interview with the Berlin festival published the day before the awards were announced.
He went on to describe how one of the film’s four episodes came about after he saw a man, who had interrogated him while he was in prison, coming out of a bank.
After following the man for a while, “I realised how normal he was and how much he resembled all other people. I realised that there was no monster involved, there was no evil in front of me, just a person who has not questioned his own actions.”
According to international rights groups, hundreds of people are executed every year in Iran.