Though dynamic assessment (DA) has gained strong theoretical and empirical support over the last decades, second language (L2) practitioners have blamed it for its applicability in large classes. To ameliorate this limitation, peer-dynamic assessment (peer-DA), rooted in the conceptualization of zone of proximal development (ZPD), can be introduced and practiced as an alternative approach. Thus, this study aimed to investigate the effects of peer-DA on cultivating Iranian upper-intermediate EFL learners’ interlanguage pragmatic (ILP) competence. Additionally, it was to disclose how peer-DA leads to improving the learners’ ILP competence. To achieve these aims, a sample of 84 upper-intermediate EFL learners, including females was selected through a convenience sampling method at Iran Language Institute in Borujerd City, Iran. Then, a total of 37 EFL learners whose scores fell around the mean score were selected and randomly assigned to two groups, namely an experimental (n = 19) and a control (n = 18). Then, they went through a pre-test, interventions (lasting 16 one-hour sessions held two times a week), and a post-test. The experimental group’s interactions were meticulously recorded. The collected data were analyzed through two independent samples t-tests, and the microgenetic development approach. Findings documented a statistically significant difference between the experimental group and control group concerning the gains of ILP competence on the post-test. Furthermore, the results of the microgenetic development analysis evidenced how the gradual, contingent prompts could lead to noticeable improvements in the learning of ILP features. These findings may have some pedagogical implications for different stakeholders.