[7] Eskandari was identified at the time as the leader of the dominant, moderate faction in the party leadership, along with Reza Radmanesh.

After his prison sentence was cut short, Iraj Eskandari decided to co-found the Tudeh Party of Iran with the goal of attracting the new radical generation of young progressive nationalist-communists.

In his diaries, he writes that "they [the founders of the Tudeh party] had on their mind to create a national movement of democratic, patriotic and progressive forces to dominate sectarianism".

Eskandari was chosen as the minister of trade, crafts and arts until the end of the year, when he was set aside from the government's cabinet.

On February 4, 1949, Mohammad Reza Pahlavi narrowly escaped a failed assassination attempt on his life.

During these events, Iraj Eskandari was outside Iran and, when his death sentence was announced along with three other Tudeh members, he decided to stay abroad, marking the start of his thirty-year exile.

In December 1969, in the 13th congress of the central committee, Eskandari returned as first secretary replacing Reza Radmanesh and in 1970, with the proposal of Ghulam Yahya Daneshian, he was elected for this role for the next seven years.

In his final days of his career, he came under the heavy pressure of the Tudeh party leaders for his opposition, specially Noureddin Kianouri, which forced him to leave Iran once and for all.

In the following years following the consolidation of the Islamic Republic under Khomeini, all major communist and marxists groups were banned, their leaders executed and their members sentenced to prison.

While outside Iran, the first "Tudeh" generation alongside Eskandari attempted to revive the party when they conducted its 18th Plenum of the Central Committee in 1983 in Bratislava, Czechoslovakia.