Abstarct: This study aims to identify and prioritize the key challenges and vulnerabilities in financing the urban transportation sector, with a strategic emphasis on developing Islamic financial instruments tailored to the practical needs of Mashhad Municipality. Employing an applied research approach with a mixed-methods design, the study seeks to bridge the gap between current financial constraints and the potential of Islamic finance, thereby offering a foundation for strategic decision-making at both managerial and financial levels. Initially, semi-structured interviews were conducted with eight municipal departments to extract five primary categories of challenges: economic, managerial, structural, cultural, and legal-regulatory. Subsequently, the Best-Worst Method (BWM) was applied to prioritize these challenges. The findings indicate that economic and managerial challenges hold the highest weights from the experts' perspective. At the sub-criteria level, “inflation and financial volatility reducing the attractiveness of Islamic bonds for investors,” “lack of stable financial resources and budgetary fluctuations,” and “mismatch between service delivery costs and inaccurate pricing” emerged as the most critical issues. Department-specific analysis within the municipality revealed perceptual and priority-baxsed differences in identifying these challenges. Ultimately, the study provides Sharia-compliant and practical recommendations, including the utilization of Sukuk, promotion of public-private partnerships (PPP), and revision of legal and regulatory frxameworks. These findings can serve as a scientific basis for enhancing the effectiveness of financial systems in urban management.