Objective: The objective of the present research is to analyze the role of fiscal autonomy of local institutions in environmental management and the reinforcement of local governance within the 22 districts of the Tehran metropolis. By focusing on the relationship between fiscal autonomy, environmental investment, environmental management efficiency, and the quality of local governance, this study seeks to explain the impacts of these variables on urban management performance and spatial inequality across Tehran’s districts.

Methods: This research is applied in terms of objective and descriptive-analytical in nature. The required data were gathered using documentary sources and a researcher-made questionnaire. The statistical population consisted of experts and specialists in the fields of urban management and the environment. Data were analyzed using statistical tests in SPSS software and spatial analysis within a GIS environment.

Results The findings of the research indicated a positive and significant relationship between the fiscal autonomy of local institutions and indicators of environmental investment, environmental management efficiency, and local governance quality. Furthermore, fiscal autonomy had the greatest impact in explaining the variations related to environmental management and local governance. Spatial results also revealed that the northern and northeastern districts of Tehran are in a more favorable condition compared to the southern and some western areas.

Conclusions: The research results suggest that strengthening the fiscal autonomy of local institutions can lead to improved environmental management, enhanced local governance, and a reduction in spatial inequality in Tehran. Therefore, the development of sustainable revenue sources and the reform of the financial structure of urban management are essential necessities.