The city of Karbala, as one of the most important religious tourism hubs in the Islamic world, has a unique potential for tourism-based urban development. However, achieving this goal requires identifying and explaining the key factors effective in formulating efficient urban policies. The present study aimed to investigate the key factors effective in developing urban policies related to tourism in the city of Karbala. The study population was all managers, senior experts, and experts in the fields of religious tourism and urban planning in Karbala province, and 15 people were selected as the research sample using the snowball sampling method. The software used in this study was MICMAC. The analysis identified seven key drivers influencing tourism-based urban policy development, ranked by importance as follows: the development of recreational and tourism centers (X14), the creation of new settlements (X1), production infrastructure development (X31), government effectiveness (X21), citizen participation (X4), citizen skill development (X23), and ambiguity in land-use change regulations (X5). The findings indicate that the development of specialized religious tourism infrastructure and human resource empowerment are the main factors in formulating successful urban policies in Karbala. Focusing on these key factors can lead to the formulation of dynamic strategies for sustainable urban development based on tourism.