This study aimed to develop a grounded theory of the process of covering identity negotiation and identity reflexivity among young women in Ilam, Iran. The study employed Strauss and Corbin's systematic grounded theory approach. Data were collected through semi-structured, in-depth interviews with 18 young women aged 18–27, selected through purposive and theoretical sampling until theoretical saturation was achieved. Data analysis proceeded through open, axial, and selective coding, resulting in the construction of a paradigmatic model. The findings revealed that cross-cutting and multiple socialization—through family, university, and media—constituted the causal condition shaping identity reflexivity and the semantic reconstruction of covering, the study's core phenomenon. This process unfolded within the local socio-cultural context of Ilam and was influenced by intervening conditions, including experiences of formal surveillance, lived social judgment, and limitations in the clothing market. In response, participants adopted a strategy of situational appearance management and tactful engagement with structural constraints, enabling them to balance personal preferences with contextual expectations. This strategy led to the reconstruction of individual identity and the emergence of a lifeworld of accommodation, through which participants maintained local social ties while expressing their individuality. Negative case analysis further demonstrated that identity reflexivity does not necessarily lead to more liberal forms of dress; rather, it may also reinforce the conscious maintenance of traditional covering. Overall, the findings indicate that covering practices in Ilam are shaped neither by simple conformity nor outright resistance, but through an ongoing process of negotiation between individual agency and structural constraints, whereby young women continuously reinterpret and manage their covering identities.