The increase of population rate in the last two centuries, and especially the urban population’s rate, may contribute to the concentration of the population around the growth poles. A large portion of the population resides in the outer area of the cities, which may cause the creation of informal settlements in suburban areas. The informal settlements are common phenomena found in developing countries. As a developing country, Iranian cities are some of the biggest cities in the Middle-East to have been developed unequally because of the growth of informal settlements. Iran has rapidly met these challenges since the 1960s. Thus, the present study attempts to emerge the different reasons for the creation of informal settlements in Iranian cities and to reveal failure reasons of Iranian government efforts to mitigate, manage and improve the informal settlements. In order to achieve this objective, the paper as an explanation research employed evaluation method using available secondary data. At last, the findings of this paper indicated that there are two major inefficiencies in failure of the government efforts, including lack of adequate national policy in low cost housing and growth in the less development regions, and inefficiencies in the management of rural and urban areas.