This study investigates the effect of dedicated market-making funds on stock liquidity of companies listed on the Tehran Stock Exchange during 2011–2017. The study is applied in purpose and correlational in method. The statistical population comprises listed companies with dedicated market-making contracts during the study period. Data were collected from companies’ financial statements and official databases of the Tehran Stock Exchange and the Stock Exchange Organization. Hypotheses were tested using a fixed-effects panel data regression model. Stock trading turnover ratio was used as the liquidity measure, and the existence of a dedicated market-making fund was the main independent variable. Free-float shares, stock returns, book-to-market ratio, fixed assets ratio, and debt-to-assets ratio were included as control variables. Results show that dedicated market-making funds have a negative and significant effect on stock liquidity. Contrary to theoretical expectations, these funds did not improve liquidity during the study period. Free-float shares, stock returns, and book-to-market ratio have positive and significant effects, while the fixed assets ratio has a negative and significant effect. The debt-to-assets ratio has no significant effect. The paired t-test shows that average liquidity before fund activity (0.0014) was higher than afterward (0.0010). The findings indicate that dedicated market-making funds alone are insufficient to improve liquidity; regulatory reforms, greater transparency, and improved capital market infrastructure are necessary.