Contemporary pilgrimage cities have increasingly confronted a fundamental challenge: the gradual disconnection between the sacred core and everyday urban life, driven by the growth of religious tourism, infrastructure development, expanded accommodation and commercial capacity, and the dominance of project-based interventions. This phenomenon extends far beyond simple physical transformations or improvements in service capacity. Focusing on the urban fabric surrounding the Holy Shrine of Imam Reza in Mashhad, this study conceptualizes the issue through the notion of “place erosion”—not as physical deterioration, but as the decline of an environment’s capacity to sustain and reproduce the place-making relationships among the shrine, the city, pilgrims, residents, everyday residential life, the local economy, collective memory, and the phenomenology of the pilgrimage experience. The primary aim is to reconceptualize segregation in religious landscapes, explain its underlying mechanisms, and propose a place-based framework for reconnecting pilgrimage with urban life. In terms of its purpose, the study is theoretical–interpretive; methodologically, it adopts a qualitative, document-based approach. Accordingly, theoretical sources, specialized studies on Mashhad, and policy and institutional documents were examined using directed qualitative content analysis. The evidence was then categorized and analyzed across four dimensions: physical–spatial, social, economic, and semantic–experiential. The governance structure was incorporated into the analysis as a cross-cutting variable. The findings indicate that “pilgrimage segregation” does not signify a decline in the presence of pilgrims; rather, it emerges from the cumulative interaction of disruptions in spatial continuity and the sequence of the pilgrimage approach, the decline of stable residence and pilgrim–resident interaction, the growing detachment of the pilgrimage economy from local livelihoods, and, ultimately, the weakening of collective memory, sense of belonging, and ritual meaning. “Place erosion”, therefore, represents the cumulative outcome of these four forms of disconnection. Ultimately, the findings suggest that a place-based development approach, emphasizing the retention of permanent residence, protection of the local economy, revitalization of pilgrimage routes and thresholds, strengthening of spaces for social interaction, preservation of human scale, advancement of spatial justice, and establishment of participatory governance, provides a suitable framework for organizing and guiding urban interventions in pilgrimage districts.