There are a few intrusive bodies in the central Sanandaj-Sirjan Zone (C-SaSZ), which is parallel to the Zagros suture zone, in western Iran. The Alvand batholith in the Hamedan area is one of these bodies and consists of rock types with large variation, in particular, two-mica garnet-bearing granite with an S-type signature. Zircon UPb dating gives crystallization ages of 170–163 Ma for the S-type granite. The 176Hf/177Hf ratios in the zircon grains vary from 0.282001 to 0.282780 (rim), with low 176Lu/177Hf ratios (0.002 to 0.018). The εHf(t) values (rim) are clustered into two main groups: a negative εHf(t) group (−6.9 to 0.0, n = 39), with some highly negative εHf(t) values (−25.8 to −21.9, n = 3), and slightly positive εHf(t) values (+0.3 to +2.9, n = 14) of inherited grains. The δ18O values for the zircon grains are positive and range from +10.4‰ to +11.8‰. The high δ18O (positive) and mostly negative εHf(t) values are more consistent with continental crustal sources for these rocks, and the Hf model ages (TDM2) show a wide range from 2.7 to 0.8 Ga, suggesting the heterogeneity of the crustal components. The long incubation time (2089 to 544 Ma) indicates a long history of crustal residence and crustal reworking. The incubation age of the zircon grains, >300 Ma, confirms the recycling of crustal material by partial melting. The simultaneous occurrence of S-type granites with mafic bodies, such as gabbro and diorite members with tholeiitic signatures, suggests that the injection of mafic magma increased the geothermal gradient from the bottom and sides along the major faults, which was the trajectory for the injection of hot mafic melts to shallow depths. These processes abnormally increased the geothermal gradients locally, and the partial melting of crustal and supracrustal materials produced S-type granites and migmatization among the hot blade-shaped mafic bodies. Therefore, the partial melting of crustal material in an extensional tectonic regime and/or in a thin continental crust occurred in a continental rift and/or in the Neo-Tethys passive margin. The present work concludes that the passive margin can be suggested as the tectonic setting for the generation of S-type granites, without the collisional regime that has been widely considered for the sources of this type of granite in the world.