Liquidity creation constitutes a fundamental function of commercial banks, which, as financial intermediaries, mobilize funds from depositors and allocate them to various economic sectors through credit facilities and investments. Given the critical role of liquidity creation in bank performance, the primary objective of this study is to investigate the impact of two key factors—deposit share and funding source diversification—on liquidity creation in Iranian banks. Examining these factors is of significant importance due to the pivotal role liquidity plays in ensuring bank stability, performance, and the facilitation of economic activities. This research analyzes data from 12 listed banks over the period 1392–1400 (2013–2021), sourced from banks’ financial statements and reports published by the Tehran Stock Exchange. To address potential econometric issues such as serial correlation and heteroskedasticity, the study employs the System Generalized Method of Moments (System GMM) dynamic panel data model. The empirical results reveal that both customer deposit share and funding source diversification exert a statistically significant negative impact on bank liquidity creation. These findings underscore the importance of optimizing deposit structure and adopting diversified funding strategies to enhance banks’ liquidity conditions.