Many Iranian cities are challenged by inefficient urban fabrics, including historic cores, deteriorated districts, and informal settlements characterized by fragmented land ownership, weak infrastructure, limited public and green spaces, and socio environmental vulnerability. Eastern Zanjan, with nearly 511 hectares of deteriorated urban fabric, represents a critical example of these conditions. The Masjidireh-ye Paeen neighborhood was selected as the case study due to severe parcel fragmentation, narrow and discontinuous street networks, infrastructural deficiencies, and elevated seismic exposure. This study reconceptualizes land readjustment as a governance-oriented policy instrument for balanced urban regeneration rather than a purely technical land management tool. A sequential exploratory mixed-methods design was adopted. In the qualitative phase, 30 semi-structured expert interviews and content analysis were conducted, leading to a conceptual framework comprising four dimensions: balanced physical-spatial development, spatial justice and social sustainability, financial-implementation efficiency, and transparent governance. These dimensions were operationalized through 32 indicators across eight criteria. In the quantitative phase, data collected from 384 residents were analyzed using confirmatory factor analysis, one-sample t-tests, and Friedman ranking. Spatial structure was evaluated using GIS and Space Syntax techniques. Findings indicate that transparency, participatory governance, and distributive justice are critical determinants of successful regeneration. Residents prioritize safety, accessibility, lighting quality, and street network improvement. The proposed model integrates five procedural stages of land readjustment—trust building, participatory design, cost-benefit allocation, infrastructure provision, and redevelopment—toward multidimensional urban sustainability.