Economic development in border regions is one of the most complex and critical challenges of development planning in developing countries. Ilam Province, with 425 kilometers of shared border with Iraq, multiple official border crossings (particularly the Mehran border crossing), abundant oil and gas reserves, rich mineral resources, fertile agricultural land, and considerable tourism potential, possesses unique geoeconomic advantages. Despite these substantial capacities, however, the province continues to face major challenges, including high unemployment, extensive out-migration, negative population growth, and deteriorating infrastructure, reflecting a significant gap between its potential and actual development. This study aims to design and formulate economic development strategies for the border areas of Ilam Province using SWOT analysis. The research adopted an exploratory sequential mixed-methods (qualitative–quantitative) approach. In the qualitative phase, thematic analysis of expert interviews, upstream policy documents, and the Delphi technique was employed, resulting in the identification of 62 indicators categorized into strengths, weaknesses, opportunities, and threats. In the quantitative phase, the Internal Factor Evaluation (IFE) and External Factor Evaluation (EFE) matrices were completed, yielding scores of 2.28 and 2.54, respectively, indicating that the province is positioned in the conservative (WO) strategic quadrant. Subsequently, the Quantitative Strategic Planning Matrix (QSPM) was used to prioritize the WO strategies. The highest-priority strategies included establishing integrated border management, upgrading customs and transportation infrastructure, completing production value chains through bilateral border special economic zones, and strengthening the capabilities of exporters. By identifying context-specific key variables and proposing prioritized strategic actions, this study not only provides a practical framework for the economic development of other border regions but also demonstrates that adopting a collaborative governance approach, leveraging economic diplomacy, and making targeted investments in infrastructure can transform Ilam from a peripheral transit region into a dynamic economic hub and a sustainable gateway for economic cooperation with Iraq.