Wealth, job creation and also technological advancements are three important fac- tors of attention to entrepreneurship and in some societies, it is believed that, an en- trepreneurial revolution is compulsory. The goal of this research is to determine and explain the effects of five environmental variables on establishment of small and medium enterprises in Mazandaran Province of Iran. According to the definition that Global En- trepreneurship Monitor (GEM) offered, a population of 1511 entrepreneurs and a sample of 291 have selected. Data collection instrument was a questionnaire including some stan- dard questions with reliability of 0.77. The results stated that, these five environmental variables were explained establishment of small and medium enterprises’ processes and everyone were affected under the above process directly and indirectly. Based on the re- sults, the most direct effect was related to Governmental and Legal Incentives variables (0.68), Economic Circumstances (0.56), Value and Social Prestige of Entrepreneurs in Society (0.53), prior acquaintance with entrepreneurs (0.49) and Self-employment of fam- ilies and friends (0.44), respectively. Finally, it is concluded that how the managers of the province should consider these environmental variables to have the most optimal results regarding SMEs.