With 78 percent of ballot boxes counted, Ahmedinejad had 64.9 percent of the vote while his chief rival Mir Hossein Moussavi had 32 percent, election officials said.
Analysts expected Moussavi, widely regarded as a reformist, to do well as his campaign caught fire in recent days, triggering massive street rallies in Tehran.
An "unprecedented" voter turnout at the polls Friday was also expected to boost Moussavi's chances of winning the presidency.
Iran's Interior Minister Seyed Sadeq Mahsouli said 70 percent of 46 million eligible voters had gone to the polls Friday, according to Fars, another semi-official news agency.
Both candidates claimed victory. Moussavi's camp accused the Iranian establishment of manipulating the vote.Voting was supposed to end after 10 hours, but because of the massive turnout, officials initially said polling stations would remain open until everyone in line had a chance to vote. However, Moussavi alleged that doors were being closed with people still waiting outside.
Some private news agencies reported many Iranians were milling about on the streets late into the night. Mehr reported that the chief of police declared public gatherings of candidate supporters illegal.
Earlier in the day, voters crowded the steps of one polling place in Tehran, some waiting more than three hours underneath the hot sun to cast their ballots. Some were lining up even before the polls opened at 8 a.m.
Moussavi is the main challenger among three candidates vying to replace Ahmadinejad. The other candidates are former parliament speaker and reformist Mehdi Karrubi, and Mohsen Rezaie, the former head of Iran's Revolutionary Guards.
Mehr reported Rezaie had 1.72 percent of the vote and Karrubi had 0.87 percent.
If no single candidate reaches a simple majority -- 50 percent plus one vote -- a runoff election will be held on Friday, June 19.
It was unclear where the ballots that had been counted so far had been cast.
Ahmadinejad still has staunch support in Iran's rural areas, but has been blamed for much of Iran's economic turmoil over the last four years. If he loses, it would be the first time a sitting Iranian president has not won re-election to a second term in office.
Fawaz Gerges, an academic and author who studies the region, said Friday's vote is really "a referendum on Ahmadinejad," who has been in office since 2005.
"The unemployment rate is 30 percent ... the largest in the third world, inflation is [in the] double digits in Iran
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