Urban regeneration in deteriorated urban fabrics cannot achieve sustainable outcomes solely through physical interventions or symbolic forms of resident participation. Understanding the socio-institutional mechanisms shaping regeneration success is therefore essential. This study examines the role of local empowerment as a mediating mechanism in the relationship among dynamic participation, social capital, and the success of urban regeneration in the deteriorated urban fabric of Hamedan. Adopting a quantitative–analytical approach, the research utilizes Partial Least Squares Structural Equation Modeling (PLS-SEM). Survey data from 412 validated responses from Hamedan residents were analyzed via SmartPLS, supplemented by qualitative insights from in-depth interviews with neighborhood residents to ensure a comprehensive understanding.

The measurement model confirmed strong reliability and validity, with all factor loadings exceeding 0.70 and HTMT values within the 0.38–0.67 range, ensuring discriminant validity. Structural findings reveal that dynamic participation (

𝛽=0.28) and social capital (𝛽=0.31) exert significant direct positive effects on the success of urban regeneration. Furthermore, the model demonstrated substantial explanatory power (𝑅2=0.41) and acceptable predictive relevance (𝑄2=0.28). Crucially, local empowerment was identified as a significant partial mediator, with indirect effects accounting for 26.3% and 22.5% of the influence from dynamic participation and social capital, respectively. This indicates that empowerment is a vital mechanism for translating participatory capacities into tangible outcomes.

The study conceptualizes local empowerment not merely as a social outcome, but as a crucial socio-institutional mediator. The results suggest that successful regeneration requires shifting from project-based to people-centered approaches, fostering local-level decision-making power, and strengthening institutional facilitation. These insights provide practical guidance for policymakers seeking to design more inclusive and sustainable urban regeneration frameworks.