Informal settlements, slums, squatter areas, pit dwellings, and urban peripheries constitute part of the problematic and deteriorated urban fabric in Iran. These urban areas are plagued by economic, social, cultural, health, and educational challenges, collectively reflecting the phenomenon of urban poverty. The emergence of such settlements—considered one of the major issues in urban management—stems from a variety of causes, rendering them complex, multidimensional problems. However, one of the most significant underlying causes relates to the country’s governance. National governance, particularly in the economic sector, plays a crucial role in the formation, persistence, or resolution of this urban dilemma. Therefore, the primary governance tool—namely, the law—can have a profound impact.

This study, through a combination of literature and document review and a research methodology that integrates expert and community interviews during field visits, seeks to investigate the legal factors contributing to the emergence of this issue. According to the findings, legal instruments have played a fundamental role in the creation, intensification, and perpetuation of informal settlements, while also offering potential pathways for resolution. Thus, identifying legal gaps and refining existing legislation can serve as a critical step toward addressing the challenges posed by informal settlements.