Iran's new dictator, Ayatollah Ruhollah Khomeini instigated the crisis when on November 1, 1979 he urged his people to demonstrate on November 4 and to expand attacks on United States and Israeli interests. The embassy was seized by a mob of around 500 Iranian students (although reported numbers vary from 300 to 2000), calling themselves the Imam's Disciples, part of a crowd of thousands gathered around the embassy in protest. The 90 occupants of the embassy were held and the 66 Americans were made prisoners. During the riot, six Americans escaped during the confusion and fled to the Canadian Embassy in Iran, under the hospitality of Canadian Ambassador Ken Taylor. Mark Lijek, Cora Amburn Lijek, Joseph Stafford, Kathleen Stafford, Robert Anders and Henry Lee Schatz were then given fake Canadian passports so they were able to leave the Canadian Embassy, without being identified as Americans, after it had closed. Thirteen of the hostages were released on November 19 and 20 (the women and African-Americans amongst the group) but the remaining 52 continued to be held (one further hostage was released because of illness on July 11, 1980).
The students justified taking the hostages by claiming it was retaliation for the admission of Iran's deposed Shah, Pahlavi into the United States for cancer treatments back in October. However, in actuality the hostage-taking was less based around one specific event and was instead largely indicative of a more general decline in relations between the two countries following the February 1979 revolution. Khomeini was viciously anti-American in his rhetoric, denouncing the nation as the "Great Satan" and Americans as "infidels" and "enemies of Islam." The embassy had in fact been briefly seized once before during the revolution.
The US President, Jimmy Carter, immediately applied economic and diplomatic pressure on Iran: oil imports from Iran were ended (November 12, 1979), Iranians in the US were expelled and around $8 billion of Iranian assets in the United States were frozen (November 14, 1979). Carter pledged himself to preserving the lives of the hostages, but beyond the initial measures he could do little. Ruhollah Khomeini did, however, order the release of 13 female and black Americans on November 17, 1979.
In February 1980 the Iranian government issued a set of demands in return for freeing the hostages, they demanded the return of the shah to Iran and certain diplomatic gestures including an apology for prior American actions in Iran and a promise not to interfere in the future.
Rejecting the Iranian demands, Carter approved an ill-conceived secret rescue mission, Operation Eagle Claw. On the night of April 24-25, 1980, as the first part of the operation, a number of C-130 transport airplanes rendezvoused with nine RH-53 helicopters at an airstrip in the Great Salt Desert of South-Eastern Iran. Two helicopters broke down in a sandstorm and a third was damaged on landing. The mission was aborted but as the aircraft took off again one helicopter clipped a C-130 and crashed, killed eight US servicemen and injuring four or more. In the evacuation sufficient mission material was left behind for the Iranians to discover and later display to the world's media.
In the US administration Cyrus Vance resigned, having opposed the action.
In 1980, the death of the Shah (July 27) and the invasion of Iran by Iraq in September made the Iranians more receptive to resolving the hostage crisis.
In the United States, Carter lost the November 1980 presidential election to Ronald Reagan. The hostage crisis played some role in Carter's defeat.
After winning the election, before his inauguration, Reagan pushed hard for a resolution. Using the Algerian government as intermediaries successful negotiations were completed. On the day of President Reagan's inauguration, in exchange for the unfreezing of Iranian assets, the hostages were freed after 444 days in captivity and were flown to Wiesbaden Air Force Base in West Germany. From there they took a second flight to Washington DC, where they received a hero's welcome.