The concept of fiscal sustainability emerged on the global governance agenda in the 1970s and has gained importance over recent decades, particularly after the 2007–2008 global financial crisis. In Iran, fluctuations in oil and tax revenues, alongside rising government expenditure, have frequently led to budget deficits and fiscal unsustainability. Moreover, financial instability and severe international sanctions during 2012–2014 and 2018–2020 have further undermined budget sustainability. This study calculates the budget sustainability index for Iran and examines the impact of key fiscal determinants-government revenues (oil and tax), public debt, financial instability, and sanctions-using the ARDL method over 1989–2020. The empirical results show that the budget was unsustainable in most years. Accordingly, A one percentage point increase in oil revenues (%GDP) raises the long-term budget sustainability index by 1.482% and 1.472% in Models 1 and 2, respectively. In contrast, a one percentage point increase in tax revenues (%GDP) and government debt (%GDP) reduces the index by –0.956% and –0.704% in Model 1, and by –0.941% and –0.680% in Model 2. The negative effect of tax revenues reflects structural inefficiencies in Iran's tax system. Furthermore, an increase in the financial instability index significantly reduces budget sustainability, with coefficients of –0.792 and –0.768 in Models 1 and 2. The coefficients for severe sanctions are –0.170% and –0.152% in the two models. These findings underscore the critical roles of tax reform, fiscal discipline, financial deepening, and sanction mitigation in ensuring long-term budget sustainability in Iran.