The financing structure of Iranian municipalities has become increasingly dependent on revenues generated from construction activities, land-use changes, and density selling over recent decades, a pattern that has produced various consequences for urban development and municipal governance. This study aims to identify and prioritize revenue diversification options for the Tehran Municipality and to propose a framework for the gradual transition from unstable to sustainable revenue sources. The research is exploratory in nature and employs a mixed-methods approach. In the qualitative phase, 14 laws, one policy document (During the period 1907–2025), and one theoretical framework were analyzed using document analysis, resulting in the identification of 56 legal capacities. In addition, 11 semi-structured interviews were conducted with experts in urban management and municipal finance, leading to the extraction of 47 proposed options. The integration of findings from these two phases resulted in 84 options, which were subsequently clustered into 25 final policy alternatives. In the quantitative phase, the evaluation criteria were weighted using the Best-Worst Method (BWM), and the alternatives were prioritized through the Additive Ratio Assessment (ARAS) method based on six criteria: revenue sustainability, revenue-generation capacity, ease of implementation, social acceptability, institutional requirements, and equity. The results indicate that options related to intelligent revenue diversification, integration of land-based instruments, financial transparency, and reform of revenue collection systems received the highest priorities. The findings suggest that improving municipal revenue systems depends less on creating new revenue sources and more on enhancing transparency, collection efficiency, and the effective utilization of existing capacities. The novelty of this study lies in integrating legal capacities with expert perspectives, systematically prioritizing policy alternatives, and proposing a policy framework for the gradual reform of municipal revenue systems.