The popular revolutions that swept across the Arab world in late 2010 and 2011 were initially welcomed in Tehran as a vindication of its policies. Since its inception, the Islamic Republic of Iran had maintained a difficult relationship with its Arab neighbours, even fighting a bloody eight-year war with one. From the Iranian point of view, Arab governments had betrayed Islam by working closely with the United States and giving up on the Palestinian cause. At first glance, the Arab revolution that deposed the ruling regimes in Tunisia and Egypt and the revolt in the Gulf sheikhdoms fitted neatly in the narrative of the Iranian regime. The Arab regimes were inclined to side with the United States in all international fora and were generally criticized for not representing the interest of their own people. But this interpretation of the Arab revolution as an automatic endorsement of the Iranian worldview was too simplistic to withstand the test of time. Very soon after the removal of Hosni Mubarak from office and the spread of unrest to Syria and Libya, the Iranian interpretation came under severe strain. In Syria, the Bashar al-Assad regime, which had been hailed by the Iranian authorities as a genuine popular alternative to many other Arab states, seemed to face the same kind of popular unrest that had paralysed its neighbours. In Egypt, the Muslim brotherhood dismissed suggestions that it might follow the Iranian model. Iran’s binary worldview of believers versus disbelief could not explain the momentous events that engulfed the region. The Arab revolution presented a conceptual challenge to the Iranian worldview. This has reminded the leadership of the tenuous nature of their hold on power. The regime has responded by doubling security measures against its internal opposition, dubbed the Green Movement. Only a year after the regime managed to suppress its own opposition rallies, the Arab revolution has made it vulnerable once again. This chapter begins with a survey of the Iranian position with regard to the Arab revolution, and then explores the impact of the Bahrain and Syrian conflicts on Iran’s standing in the region. It argues that the double standard in relation to these conflicts has eroded Iran’s soft power on the Arab streets and led to its marginalization. The chapter concludes with an assessment of the internal implications of this strategic demise as the regime feels pressured from within and without.