Digital transformation (DT) in Iran’s public sector presents significant opportunities to enhance governance, service delivery, and citizen engagement through technologies like AI, IoT, and cloud computing. However, challenges such as economic sanctions, brain drain, infrastructural deficiencies, and bureaucratic resistance hinder progress. This study explores strategic pathways for advancing DT in Iran by proposing a four-pronged approach: (1) establishing a centralized DT authority to streamline governance; (2) accelerating cloud and AI adoption through localized solutions; (3) enhancing human capital via upskilling and diaspora engagement; and (4) fostering citizen trust through user-centric digital platforms. Grounded in theoretical frameworks like Institutional Theory and the Technology Acceptance Model (TAM), the study emphasizes the need for policy coherence, technological resilience, and inclusive participation. Despite constraints, Iran’s youthful demographic, academic strengths, and localized innovations (e.g., in banking and telecommunications) offer a foundation for sustainable DT. The proposed strategies—phased over short-, medium-, and long-term horizons—aim to mitigate systemic barriers while aligning with global best practices. By balancing ambition with pragmatism, Iran can position itself as a regional leader in digital governance by 2035, leveraging DT to drive transparency, efficiency, and societal resilience. This research contributes to the discourse on public sector innovation in constrained environments, offering actionable insights for policymakers, technologists, and civil society stakeholders.