Background: Short and long birth spacings have negative effects on the health of mothers and children and consequently on the level of mothers’ employment. Objectives: This study aimed to investigate the effect of first and second children spacing on mothers’ labor force participation in Iranian urban households. Methods: This descriptive-analytical cross-sectional study was performed using econometric methods as a probit and probit model with an instrumental variable in Stata version 16 in 2021. The sample size included 8920 urban households in all provinces of Iran, and the data were extracted from the cost and income questionnaire of urban households. Results: The birth spacing of the first and second child had a positive effect equal to 0.16 on the probability of employment of mothers in households with 2 children, which was equal to 0.22 for households with 2 or more children. The coefficients of maternal age, having a private home, father’s education, and father’s age on mothers’ employment were -0.02, -0.09, -0.06, and 0.02 in households with 2 children, respectively. Conclusions: Increasing the birth spacing, especially for the first and second child, led to an increase in the probability of the mother’s employment in the labor market. Therefore, optimal birth spacing is recommended, which improves both the health of the mother and the child and does not reduce job opportunities. In this regard, policies to promote optimal birth spacing through raising awareness, the use of contraceptive methods, and the importance of breastfeeding are also proposed.