The conversion of agricultural waste into organic fertilizer through vermicomposting is a sustainable waste management solution and an income source for organic fertilizer producers. Most of the agricultural waste in Iran is burned, triggering an array of negative consequences. Vermicompost production at the farm level is rarely practiced in Iran, and farmers play a central role. The study aimed to identify the factors influencing the adoption of on-farm vermicomposting and its level (number of cycles), barriers to it, and to provide adapted policy recommendations. The study used a mixed-method approach, with a survey on 142 farmers and semi-structured interviews with stakeholders. The study showed that attitude (β = 0.515, sig. = 0.01), subjective norms (β = 1.745, sig. = 0.01), vermicomposting training (β = 2.160, sig. = 0.01), safe spraying (β = 2.915, sig. = 0.01), and integrated pest management (β = 1.793, sig. = 0.01) influenced the participation in vermicomposting. Some of the barriers to vermicomposting revealed by the qualitative research were the initial investment cost, farmers’ short-term vision, lack of necessary infrastructure, and lack of subsidies. The study complements the scant information on farmers’ vermicomposting behavior and proves that its understanding is essential to remove barriers and engage farmers in vermicomposting. Practical recommendations based on findings support sustainable agricultural waste management.