The exponential growth of the Internet of Things has precipitated a revolution in Intelligent Transportation Systems, notably in urban environments. An ITS leverages advancements in communication technologies and data analytics to enhance the efficiency and intelligence of transport networks. At the same time, these IoT-enabled ITSs generate a vast array of complex data classified as Big Data. Traditional data analytics frameworks need help to efficiently process these Big Data due to its sheer volume, velocity, variety, and significant data privacy concerns. Federated Learning, known for its privacy-preserving attributes, is a promising technology for implementation within ITSs for IoT-generated Big Data. Nevertheless, the system faces challenges due to the variable nature of devices, the heterogeneity of data, and the dynamic conditions in which ITS operates. Recent efforts to mitigate these challenges focus on the practical selection of an averaging mechanism during the server’s aggregation phase and practical dynamic client training. Despite these efforts, existing research still relies on personalized FL with personalized averaging and client training. This paper presents a personalized architecture, including an optimized Federated Averaging strategy that leverages FL for efficient and real-time Big Data analytics in IoT-enabled ITSs. Various personalization methods are applied to enhance the traditional averaging algorithm. Local fine-tuning and weighted averaging tailor the global model to individual client data. Custom learning rates are utilized to boost the performance further. Regular evaluations are advised to maintain model efficacy. The proposed architecture addresses critical challenges like real-life federated environment settings, data integration, and significant data privacy, offering a comprehensive solution for modern urban transportation systems using Big Data. Using the Udacity Self-Driving Car Dataset foe vehicle detection, we apply the proposed approaches to demonstrate the efficacy of our model. Our empirical findings validate the superiority of our architecture in terms of scalability, real-time decision-making capabilities, and data privacy preservation. We attained accuracy levels of 93.27%, 92.89%, and 92.96% for our proposed model in a Federated Learning architecture with 10 nodes, 20 nodes, and 30 nodes, respectively.