In recent years, the role of oil rent in Iran's economy has gained special attention. As one of the main sources of revenue, oil rent interacts with macroeconomic instability to have complex effects on the structure of the country's underground economy, revealing new dimensions of Iran's economic challenges. This study examines the impact of oil rent on the underground economy under macroeconomic instability during 1978-2023 using a quantile regression approach. The relative size of the underground economy was first estimated by the MIMIC method, showing an average of 16.8 percent in Iran's economy. Results indicate that oil rent positively (adversely) affects the underground economy across most quantiles. Moreover, the interaction effect of oil rent and macroeconomic instability is positive and signifies the amplifying role of instability on oil rent’s adverse impact. However, this amplifying effect is not statistically significant in the upper quantiles. Other variables, such as government size and trade openness, affect the underground economy negatively and positively, respectively. Based on the empirical results presented, reducing the size of the underground economy through controlling oil rent and reducing economic instability requires implementing policies aimed at decreasing dependence on oil revenues and strengthening economic stability.