The historic fabric of Iranian cities that formed around religious elements now faces serious challenges such as physical fragmentation, social erosion, and functional inefficiency. This study was conducted to clarify an effective intervention model for the “sustainable regeneration” of the historic fabric in the Imamzadeh Mohammad neighborhood of Tafresh. The research method is mixed: the qualitative part employs interpretive-historical strategies and field studies (observation, in-depth interviews, and cognitive mapping), and the quantitative part uses Analytic Hierarchy Process (AHP) to prioritize the site’s potentials. Findings indicate that purely physical interventions (single-building restoration) do not meet the complex needs of the fabric. Results from the SWOT analysis suggest that a “defensive-competitive” strategy is the most appropriate approach for this area. The findings support a culture-centered, tourism-based regeneration scenario. Accordingly, the proposed plan is presented at three scales: macro (organizing the access system), meso (organizing public realms and façades), and micro (adaptive reuse of historic houses for cultural–accommodation purposes). Regenerating the historic fabric around Imamzadeh Mohammad in Tafresh requires a shift from a “museum-like, purely preservative” approach to a “dynamic, participatory” one. By multilayered analysis of the fabric surrounding Imamzadeh Mohammad, this study concludes that “regeneration” in this context is not a linear process but a cycle between “reading the past” and “responding to the present.” Results show that relying solely on oil revenues or government budgets for restoration will not succeed. The salvation of the fabric lies in “economizing conservation.” This research demonstrates that regeneration based on a “religious-historical tourism” model can be the driving engine of the neighborhood’s economic development, provided that infill design regulations are carefully observed.