Historical bazaars in traditional Iranian cities transcend simple commercial marketplaces; they constitute the intricate spatial, social, and cultural backbone of urban identity, memory, and community life. The physical and semantic sustainability of these historic cores relies heavily on the uninterrupted continuity and symbiotic relationship between the central commercial spine and the surrounding residential and urban fabric. Mashhad’s Sarshour Bazaar, holding a position of profound historic and spatial significance within the traditional fabric surrounding the Holy Shrine of Imam Reza, historically functioned as a dense, integrated network interwoven with diverse access routes, commercial-religious institutions, pilgrim accommodations, and traditional public baths. However, despite recent targeted conservation and restoration interventions along the primary retail axis of the bazaar, contemporary urban appraisals reveal that the adjacent background fabric suffers from severe physical degradation, functional monotony, structural obsolescence, fragmentation of the historic pedestrian network, and a marked decline in public space quality and social vitality. This glaring disparity has created a critical structural mismatch and spatial disconnection between the isolated conservation of the monument and the progressive decay of its surrounding context. This research aims to comprehensively explain the multi-layered spatial-functional conditions of Sarshour Bazaar and to formulate a robust, holistic framework for its integrated urban regeneration, utilizing a descriptive-analytical methodology and a layered analytical framework. Empirical and historical data were systematically gathered via exhaustive documentary and literature reviews, historical map interpretation, rigorous physical and functional field surveys, historical archive evaluations, and structured stakeholder perception surveys administered through Likert-scale questionnaires. The findings were meticulously evaluated across four distinct analytical layers: physical-morphological, functional-economic, accessibility-network, and socio-cultural. The results demonstrate that isolated, single-axis restoration initiatives that ignore the surrounding urban matrix fail to achieve genuine or sustainable urban revitalization. Consequently, this study emphasizes the paramount necessity of transitioning from conventional, isolated restoration practices to an integrated regeneration paradigm that safeguards historical spatial continuity, encourages community participation, and restores socio-economic vitality to both the bazaar and its hinterland.