Religious associations (hey’ats), as deeply rooted institutions in Iranian society, possess capacities that extend beyond their religious and ritual functions to encompass social participation and the strengthening of social capital. The present study aims to analyze the functions of good governance in religious associations in the city of Yazd. Adopting a qualitative approach, the study was conducted using grounded theory methodology based on the systematic approach of Strauss and Corbin. Data were collected through semi-structured interviews with 35 participants, including religious association activists, officials and representatives of relevant institutions, and university and seminary scholars. In addition, relevant documents were analyzed, and participant observation was conducted in five religious associations. Participants were selected through purposive sampling using a maximum-variation strategy, with sampling continuing until theoretical saturation was achieved. The data were analyzed using ATLAS.ti through the stages of open, axial, and selective coding. During open coding, 243 initial concepts were identified and organized into 67 subcategories. Ultimately, three core categories—leadership, management, and social relations—were identified and integrated into the study’s theoretical model. The findings indicated that, in the leadership dimension, religious and spiritual leadership, ethical role modeling, and value-based direction; in the management dimension, accountability and transparency, rule of law and organizational order, efficiency and effectiveness, and strategic planning; and in the social dimension, participation and collective synergy, social justice and inclusion, and consensus-building and dialogue constitute the major components of good governance. The findings demonstrate that religious associations, through strengthening trust, cooperation, and popular participation, possess the capacity to function as social and intermediary institutions within governance processes.