Iranian shorts ''Monochrome Days'' by Ehsan Nurqani and ''Footprint'' by Farid Mirkhani are also competing at the festival, which will come to an end on Sunday.
The name ''Loopetou'' is inspired by the word the Kermani people of Iran use to refer to handmade toys that mothers used to make for their children in the past.
The animation is about a hospital where a doctor treats his mental patients by letting them make toys. An unknown culprit vandalized the creative toy workshop, which is particularly popular among Iranian children, and causes its closure. The doctor's son, Ali tries to help his father to slove the problem.
''Loopetou'' previously took part in various national and inernational festivals including the KidzCINEMA festival in India and Universal Kids Film Festival in Turkey.