Groundwater overexploitation has become one of the major challenges to sustainable development in Iran in recent decades. Accordingly, this study investigates the effects of economic, demographic, meteorological, and climatic factors on groundwater extraction across the provinces of Iran. To this end, panel data from 30 provinces covering the period 2006–2022 were analyzed using an econometric model. Given the presence of cross-sectional dependence, heteroskedasticity, and autocorrelation in the data, the Feasible Generalized Least Squares (FGLS) method was employed to estimate the model. To account for climatic differences among provinces, the provinces of Iran were classified into four climatic zones, and the effects of these differences were incorporated into the model through climatic dummy variables. The results indicate that agricultural value added has a positive and statistically significant effect on groundwater extraction, while its squared term has a negative and statistically significant coefficient. This finding suggests the existence of a nonlinear relationship between agricultural economic activities and pressure on groundwater resources and supports the Environmental Kuznets Curve hypothesis in the context of water resources. Furthermore, population has a positive and statistically significant effect on groundwater extraction, with a coefficient of 1.753, highlighting the role of population pressure in increasing water demand. Among the meteorological variables, precipitation has a negative and statistically significant effect on groundwater extraction, with a coefficient of −0.089. The results of the climatic dummy variables also reveal regional heterogeneity in groundwater extraction patterns. Specifically, hot and arid regions exhibit greater dependence on groundwater resources, whereas humid regions impose less pressure on these resources. Overall, the findings indicate that sustainable groundwater management requires region-specific policies, improved water-use efficiency, and simultaneous consideration of economic, demographic, meteorological, and climatic factors.