Tehran was chosen to be the capital by Agha Mohammad Khan Qajar, who moved the capital from Sari in the Mazandaran region between the Alborz and Caspain sea.

While it is located north and inland as you have stated, Tehran was long a center of caravan trade as far back as the pre-Median period and was close to Shahr-e-Ray, or the “City of Ray,” which is the home of many monuments including a shrine commemorating Princess Shahr Banu who gave birth to Ali Zayn al Abidin, the fourth holy Imam.

Furthermore, Tehran was located close to the tribal holdings of the Qajars and virtually on the frontier of the Qajar’s foe, the Turkmens. It also allowed for the Qajar dynasty to have a capital that was associated only with the Qajars—the Afsharid dynasty was in Mashhad and the Safavids were in Tabriz and Isfahan.