The bill, passed earlier this month by the California Legislature, would ban the United States' two largest public pension funds - the California Public Employees Retirement System and the State Teachers Retirement System - from investing in companies that work on defense or nuclear projects or are involved in developing Iranian petroleum or natural gas resources.
"I look forward to signing legislation to divest from Iran to take an equally powerful stand against terrorism," Schwarzenegger said in a statement Monday. The signing could come this week, said spokesman Aaron McLear.
CalPERS estimated the ban would require it to divest an estimated $2 billion (EUR1.4 billion) from 10 companies.
California, which passed a similar law last year regarding investments in Sudan, is among several states to take financial action against Iran. Similar legislation is pending in Congress.
The board governing Florida's public employee retirement fund has authorized it to divest nearly $1.3 billion (EUR920 million) invested with 21 companies doing business in Iran or Sudan. State Sen. Ted Deutch said Florida is the first state to pass a ban applying to Iran.
Texas Gov. Rick Perry wants his state's pension funds to divest, saying he might call a special legislative session to act if he can't order the action himself.
Michigan's House and Senate have approved separate divestiture bills, none of which has advanced to the governor's desk.