This study investigates the impact of Foreign Direct Investment (FDI) on digitalization in Iran over the period 2001–2024 using a Bayesian Vector Autoregression (BVAR) model. The relevance of this topic stems from the fact that digitalization has become a primary driver of productivity enhancement, economic growth, and increased competitiveness, and FDI can accelerate this process through technology transfer, financing, and the upgrading of productive capacity. The findings indicate that a positive shock to FDI exerts a statistically significant and positive effect on the digitalization index. This effect is most pronounced in the initial periods, gradually moderating thereafter. Furthermore, positive shocks to domestic investment and gross domestic product (GDP) also yield positive effects on digitalization. Specifically, economic growth strengthens the digitalization process by enhancing financial capacity and investment, while domestic investment fosters it through the development of communication and technological infrastructure. In contrast, a positive shock to the exchange rate has a negative short-run effect on the digitalization index, primarily due to the increased cost of importing digital equipment and technologies. The variance decomposition results further reveal that, in the short run, most of the fluctuations in the digitalization index are attributable to its own shocks. However, over the medium and long term, the contribution of FDI and domestic investment increases significantly. Accordingly, digitalization in Iran is strongly influenced by both internal dynamics and macroeconomic investment variables and stability. Based on these findings, it is recommended that policymakers facilitate the acceleration of the digital transformation in Iran’s economy by improving the business environment, reducing barriers to foreign capital attraction, supporting domestic investment in the technology sector, and ensuring macroeconomic stability.