Higher education in Iran is confronting with several challenges; some of them are increasing demand for education and insufficiency of current programs to meet the growing needs, emerging information age and the necessity of achieving information literacy, and extending educational justice. It is assumed that a high performance e-learning system can overcome to the mentioned problems. It removes time and place restrictions and creates economical benefits, and makes available lifelong learning opportunity for all. The primary purpose of this study was to identify challenges of electronic learning development in Payame Noor University of Iran to present feasible solutions for establishing a suitable e-learning system. Descriptive survey design for data collection was adopted in this study. The population of this study was consisted of 600 instructors and faculty members. A sample of 160 faculty member was selected by using random sampling method. Results show that barriers such as incompatibility of contents and methods, skill unavailability, attitudinal hampering, cultural barriers, infrastructural obstacles, encouraging and credit barriers as well as barriers related to incorporating e-learning into traditional education systems were the main challenges of e-learning in the Payame Noor University. Also results revealed that factors such as educational effectiveness in e-learning, policy making, university's technical and social support of e-learning, financial support and expansion of income earning for instructors and faculty members, improving working conditions, foreign language skill and faculty members interest in professional development were the most important factors in developing e-learning in Payame Noor university of Iran. (Contains 5 tables.)