This study aimed to identify the driving factors of creative tourism in the urban development of Birjand. Employing a qualitative approach with an applied orientation, the research utilized semi-structured in-depth interviews with 25 academics and experts selected through purposive sampling. Data were analyzed using grounded theory methodology with triple coding procedures. The findings reveal that creative tourism in Birjand emerges from the interplay of three categories of factors: causal factors (creative human capital and intangible cultural heritage), contextual factors (weak economy, peripheral geographical location, and lack of modern entertainment), and intervening factors classified on two sides as inhibitory (conservative cultural heritage approaches, budget constraints, and elite migration to metropolitan areas) and facilitative (social media networks and the dual-impact of the COVID-19 crisis). Practical strategies were developed across five axes: establishing a creative city secretariat, creating a single-window licensing system, organizing annual creative tourism festivals, implementing creative rehabilitation of historic urban fabric through public-private-community partnerships, and establishing micro-credit funds for creative enterprises. Anticipated outcomes include sustainable employment in handicrafts, functional revitalization of deteriorated urban textures, reduced elite outmigration, and extended tourist length of stay. The innovation of this research lies in presenting a locally-grounded model of creative tourism for intermediary and peripheral cities which, unlike metropolitan centers, does not rely on advanced physical infrastructure but rather draws upon human capital and intangible heritage. These finding challenges conventional urban planning practices and demonstrates that leveraging invisible assets can overcome financial constraints. Realizing these strategies requires a shift from traditional management toward creative governance. Furthermore, the dual role of the COVID-19 pandemic underscores the necessity of digital tourism resilience for future crises. By emphasizing people-centered and event-based approaches over material attractions, this study offers a transferable model for similar cities in arid and peripheral regions.