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The objective of this study is to investigate the impact of industry concentration on the average stock returns, and proposing a model to explain this relationship. Explanatory variables are Herfindahl- Hirschman Index of industry concentration, industry size (market equity), book-to-market ratio, leverage, past 1-year's industry return and systematic risk (beta); also the industry average return is taken as the dependent variable. With respect to the concentration index is an industry specific, all of the dependent and independent variables in this research are evaluated in industry level. The study covers 1380- 1386 and uses 31 manufacturing industry-year observations. For examine the research hypothesizes, we use the Panel Data technique with Fixed Effect and Generalized Least Squares (GLS) method. Results indicate that in Tehran Securities Exchange there is significant relationship between industry concentration, size, book-to-market ratio, systematic risk and average stock returns. On the other hand, leverage and past 1-year's industry returns are not associated with annual industry returns.