Identifying the economic potential of informal urban areas is an issue that has attracted the attention of policymakers and practitioners in less developed countries. Yet, little is known about how informal settlements affect the type and number of business opportunities. Therefore, the present study aimed to measure and evaluate the factors affecting the development of home-based businesses (HBBs) in the informal settlements of Khalil Abad neighborhood in Tabriz city. The main tools for data collection were interviews and a questionnaire. The findings were analyzed by the confirmatory factor analysis (CFA) approach. The population and statistical sample included managers and experts of organizations and companies active in the field of employment and entrepreneurship, local entrepreneurs and HBB owners in informal settlements, and expert and prominent university professors in East Azerbaijan province in the qualitative phase and entrepreneurs and HBB owners in informal settlements in the quantitative phase who were selected using simple randomization. The dimensions of the proposed model were, in order of importance, financial-economic factors (0.78), infrastructural factors (0.76), marketing factors (0.69), socio-cultural factors (0.64), personality-individual factors (0.58). ), technical-technological factors (0.52), legal factors (0.51), and environmental factors (0.50). Also, the findings showed the positive and significant relationship of these constructs with HBB development. The output of this research provided a model for the development of HBBs in informal settlements.