The present research examines and explains the impact of urbanization growth on economic welfare in Iran over the period 1973–2021. Given the importance of demographic transitions, this study, using the Autoregressive Distributed Lag (ARDL) model, seeks to test a quadratic (non-linear) relationship between urbanization growth and economic welfare. The research findings indicate that urbanization growth has a direct and positive effect on economic welfare in the long run. Furthermore, the results support a U-shaped relationship; implying that in the initial stages of urbanization, welfare decreases (or inequality increases), and as development progresses, economic welfare increases—which corroborates the Kuznets curve. Regarding the control variables, 'per capita income' and the 'trade openness index' exert a positive effect, while 'inflation' and 'oil rent' have a negative impact on economic welfare in Iran.