The study presents a political economic analysis of socio-spatial inequality in Tehran focusing on four sectors of social reproduction, namely, housing, healthcare, education, and transportation. The existing analyses of socio-spatial inequality in Tehran by Iranian social scientists see the problem as a technical matter and criticize e.g. bad planning, poor policy-making, undemocratic state, and corruption. Political economic structures behind the inequalities, however, have not been addressed. Two theoretical models are discussed. Model 1 is derived from the existing analyses by prominent Iranian social scientists discussed above. Model 2 is derived from the works by political economic geographers such as David Harvey. The paper maintains that the urbanization processes, aside from being planetary in character, are highly variegated in historical and geographical contexts. The paper, therefore, proposes a dialectical approach for analysis. Using a modified version of Model 2, the paper argues socio-spatial inequality in the city is rooted in peculiarities of Iranian capitalism. Low productivity in the manufacturing sector requires lowering the value of labor power in order to maintain profit. Prolonging the working day and cutting wages have reached their biophysical limits for the labor and investment in urban space and built environments is a resulting strategy for the rent-seeking capitalists. Iranian marketized state performs as a facilitator (rather than a regulator) in urbanization process. The study also discusses the role of luxury market in neutralizing the anticipated negative feedback mechanism of low social demand