Official statistics and evidence indicate that, despite its considerable relative and potential economic advantages, Zanjan Province does not have a desirable position in terms of key economic development indicators compared with neighboring provinces and the national average. Accordingly, the present study was designed to develop a theoretical model to explain the state of development of the service sector in Zanjan Province. This is an applied study that adopts a qualitative data collection method. It was conducted using grounded theory methodology. The research population consisted of experts and key informants in the service sector of Zanjan Province in 2025. Purposive and theoretical sampling continued until theoretical saturation was achieved, culminating in semi-structured interviews with 15 participants. Data were analyzed using the systematic procedures proposed by Strauss and Corbin, through three stages of open, axial, and selective coding. The findings suggest that the causal conditions contributing to the underdevelopment of the service sector in Zanjan Province include sectoral centralization and a lack of policy synergy, insufficient investment in services, the absence of institutional and financial support for service-sector businesses, and the sector’s dependence on the government and bureaucracy. The province’s geography and location, the consumption culture of society, limited public awareness of the importance of modern services, and low levels of technological development were identified as contextual conditions. Economic fluctuations and sanctions, the migration of skilled professionals to Tehran or abroad, frequent political and managerial changes, and rapid technological changes coupled with an inability to adapt were identified as intervening conditions. Finally, a decline in quality of life and social satisfaction, the persistence of regional development inequalities across the country, and the continued economic dependence of the province on traditional sectors were identified as consequences of the underdevelopment of the service sector in Zanjan Province.