Davutoglu arrived in Tehran at the head of a high-ranking political and economic delegation Friday night for a two-day official visit.
Earlier on the day, the Turkish prime minister and Iran's Vice President Es'haq Jahangiri attended a joint press conference.
Jahangiri said he held two meetings with Davutoglu, where they “had fruitful discussions on bilateral ties and regional issues.”
The official highlighted the two neighbors’ determination to enhance their bilateral relations, particularly in the economic sector.
“We had set a USD-30-billion target for the [annual] bilateral trade. It was agreed that the countries’ Joint Commission meet in Turkey over the next month so all the obstacles on the way of bilateral trade be identified and removed,” he added.
Davutoglu also said that the removal of the nuclear-related sanctions against Iran means the two neighbors can easily exceed the trade target.
"The main obstacle that prevented us from reaching our goal was the sanctions. Being free of those, means we can easily surpass our goal of $30 billion," Davutoglu said, adding he hoped to encourage mutual direct investment.
Trade between the two nations was $9.7 billion in 2015, according to the Turkish Statistical Institute.
Turkey has trailed other European countries eager to tap into Iran's $400 billion economy after world powers, led by the United States, reached an agreement with Tehran last year.
Turkey mainly sells machinery and iron and steel products to Iran. Oil and natural gas make up 90 percent of Iranian exports to Turkey, the Turkish Foreign Ministry said.
Turkey will serve as a key transit for Iranian energy supplies to Europe, Davutoglu added.
Both officials also discussed developments in the region.
Davutoglu said Turkey and Iran, two countries on opposite sides of Syria's war, must develop a "common perspective" in order to end sectarian strife in the region.
"It is extremely important for Turkey and Iran to develop some common perspectives in order to end our region's fight among brothers, to stop the ethnic and sectarian conflicts," he said.
Iran, along with Russia, has stood by Syrian people and President Bashar al-Assad in the five-year war, while Turkey is most outspoken critic and has backed those fighting the Syrian government.
"We may have different views but we cannot change our history or our geography," Davutoglu said.
Jahangiri said the restoration of peace to the Middle East is in the interest of both neighbors.
"We have our differences on some regional issues, but we are determined to manage the differences to reach stability in the region ... Iran and Turkey would both benefit from regional security and stability," Jahangiri said.
The premier’s trip is the highest level between the two neighboring countries for almost a year after President Recep Tayyib Erdogan paid an official visit to Tehran in April 2015.