Iran is taking steps toward an aggressive new form of censorship: a so-called national Internet that could, in effect, disconnect Iranian cyberspace from the rest of the world.

The leadership in Iran sees the project as a way to end the fight for control of the Internet, according to observers of Iranian policy inside and outside the country. Iran, already among the most sophisticated nations in online censoring, also promotes its national Internet as a cost-saving measure for consumers and as a way to uphold Islamic moral...