Business cycles in every country explain fluctuations in national production so that these fluctuations play important roles in performance of each country. The reason of importance of studying business cycles are that economic planning without understanding of how fluctuations in GDP and cause of these fluctuations, is not seem effective. So the roles of oil shock as an effective factor in recognizing of these cycles are very important. Also economic dependence of Iran to oil causes in volatility of oil price, the economy meet crisis. Purpose of this thesis is determining and solving of Iran cycles and effect of oil price fluctuation on these cycles using Markov switching model. In this case Markov switching model MSM-ARMA are proposed for determining business cycles. The result of model for US GNP shows that the above model explains the US business cycles, better than Hamilton model. In line with the main objective of research, proposed model for Iran business cycle is estimated by using of quarterly data 1367(1) - 1387(2) and result of this estimation showed that economic of Iran despite of having two periods of recession 1371(3) - 1371(4) and 1374(1)-1374(2), is out of recession with moderate growth and also experienced growth with high rate in early period of studying. Also the possibility of resistance of recession regimes with moderate and high growth is 0.3, 0.92 and 0.5 respectively. The results show the economic tend to stay in moderate growth regime. For analyzing effects of oil price shocks on production and business cycles was done by using two methods. The first method was extracting of oil price shocks by using Markov switching model and estimation long run relation by using the pattern accumulation Johansen Juselius. The results suggest that hypothesis of symmetry of positive and negative oil shocks on production is been rejected, so we can infer that the effects of negative and positive shocks on production are different. Asymmetry in effects of negative and positive shocks of oil price is verified in recession and boom periods. Furthermore the effects of negative oil shocks in recession or boom periods are more than positive shocks. Second method implies the effect of oil price fluctuation on average business cycles and probability of the transition by using Markov switching model. The results showed that the increasing the price of oil, decrease the probability of resistance of recession regime and increase transition from this regime to another regime with moderate growth. But when negative oil shock variables in model is used, average recession regime decrease and also increase the possibility of resistance of recession regime and decrease the possibility of transition from this regime to the regimes with high and moderate growth. According to these results when the oil price shock with the difference of first degree is used, they will have a good explanation.