Aim The ongoing COVID-19 outbreak has not only had an impact on physical health but also on psychological health. The aim of this study was to measure the prevalence and severity of psychological distress in the community due to the COVID-19 pandemic. Methods This cross-sectional survey was conducted in February and March 2020 in Tehran, Iran. We analyzed demographic characteristics and assessed depression, anxiety, and stress levels in 241 people using convenience sampling and the DASS-21 questionnaire. All statistical analyses were performed using R. Results The study population included 241 community-dwelling participants, of whom 145 were women and 96 were males. The mean age was 49.16 ± 8.01 years. Approximately two-thirds of participants (n = 158) reported no history of comorbid illness. The mean scores of depression and stress were at a "severe" level, while anxiety levels were at an "extremely severe" level. The prevalence of severe and extremely severe depression readings was 51.45 and 38.17%, respectively. In the anxiety subscale, the prevalence of severe and extremely severe depression was 95.90 and 4.1%, and in the stress subscale the prevalence was 48.97 and 4.98%, respectively. Conclusion In this study, people reported experiencing severe and extremely severe psychological distress. Therefore, there is an urgent need to implement mental health intervention policies to cope with this ongoing challenge. We suggest that the incorporation of molecular biomarker tests into the algorithm could aid in assessment of patients and guide the most appropriate therapeutic response.