Introduction: Knowledge-Based Economy (KBE) is often explained as a possible way for society to achieve sustainable economic growth, and solve various environmental challenges caused by the increasing scarcity of resources. Today, in most countries, the process of sustainable development is well aligned with the development process of KBE. To achieve appropriate changes, these two processes need to be coordinated. Based on this, this study aimed mainly at focusing on the factors related to KBE, that improves the environmental situation, increases competitiveness, and achieves sustainability in Iran. Despite all the advantages of KBE and its role in the development of countries, according to the latest ranking of KBE in 2012 by the World Bank, Iran’s economy was not in a good place among other countries. Also, currently one of the most important issues at the global and national level in many countries of the world is environmental issues, and for this reason, several environmental indicators were proposed to monitor the processes of environmental destruction. One of the most important indicators, which is currently widely used as a benchmark for comparing countries and is published biannually regarding environmental protection, is the Environmental Performance Index (EPI). In this research, an attempt was made to investigate the effect of KBE components on Environmental Performance Index (EPI) of Iran and neighboring countries. 
Materials and Methods: The World Bank identified four pillars in the framework of KBE, including economic and institutional regime, education and skills, information and communication infrastructure, and innovation system. Each of these pillars consists of indicators. The Knowledge Economy Index (KEI), developed by the World Bank for the Knowledge Assessment Method (KAM), examines whether the environment is suitable for the effective use of knowledge for economic development. KEI is a comprehensive index equivalent to the average normalized scores of the performance of a country or region in each of the four pillars, indicating the overall progress of that country or region from the perspective of the knowledge economy. On the other hand, the environmental performance index is also a composite index that summarizes country-level data on 40 specific indicators. In this study, while knowing the components of the Environmental Performance Index (EPI) and the Knowledge-Based Economy (KBE), the performance of EPI was evaluated against each of the dimensions of the knowledge-based economy. For this purpose, the components of the KBE were included in the modeling once in the form of four pillars in a separate form, and again in the form of the KEI composite index. The studied countries included Iran, Türkiye, Iraq, Pakistan, Azerbaijan and Armenia.
Results and Discussion: According to the study results, the highest score obtained in the composite index of KBE belongs to Türkiye with a value of 7.27, and after that, Armenia and Iran are in almost the same rank with an average of 5.85 and 5.57, respectively. In terms of the constituent elements of the KBE, Armenia performed better than other countries in providing an economic and institutional regime, and the same was true for Türkiye in education and skills. Azerbaijan and Iran countries were leaders in the field of information and communication infrastructure, and innovation system, respectively. The estimation of the final model of the panel data with the Generalized Least Squares (GLS) method indicated that the share of government education expenditures in the GDP (related to the education and skills component) was the only variable that had a positive effect on the Environmental Performance Index (EPI). In such a way that with a one percent increase in the share of education expenses, EPI would increase by 0.336 percent. The variable of the volume of international trade (one of the indicators of the pillar of the economic and institutional regime) and the variable of the share of research and development expenses in GDP (belonging to the pillar of the innovation system) showed a significant negative effect on the environmental performance of countries. Similarly, the composite index of the KBE also had an inverse relationship with EPI. 
Conclusion and Suggestions: Based on the results, it is necessary to adopt strict environmental laws for the activities of relevant units, especially foreign companies, in order to prevent pollution and resource depletion. Avoiding the sale of raw materials and exporting products with higher value-added is recommended in this regard. In the case of Iran, with a high rank in the pillar of the innovation system, the development of the export of technical and engineering services can be considered. Keeping in mind the positive effect of investing in education and human resource development, it is recommended to pay attention to increasing the share of government education in the GDP. It should also be ensured that the resources needed to finance education are distributed fairly in educational levels, programs and regions to improve the enrollment rate and quality of education