This study examines the quality of residential design education at Yazd University and identifies educational gaps in the Architectural Design Studio 2 course. The central problem is the dominance of physical and economic concerns over the concept of dwelling, which reduces residential design to floor-plan drafting and distances it from the human, cultural, and psychological dimensions of living. The research adopts Grounded Theory. Data were collected through in-depth interviews with faculty members, direct observation of Design Studio 2 sessions, and analysis of student projects. Findings were validated against two frameworks: the officially approved course syllabus and Maslow’s hierarchy of needs. Maslow’s theory is used not as a hypothesis to test, but as a checklist-based evaluative tool to map how different layers of human need appear in residential design education. Results show that the course addresses physiological, physical, and safety needs relatively well. As analysis moves toward higher levels of the hierarchy, instructor attention gradually decreases. Needs related to belonging, spatial flexibility and personalization, neighborhood relations, social interaction, and cognitive and aesthetic experience receive less emphasis. Cultural and local considerations, façade detailing, construction and family economics, and material quality are also insufficiently integrated into teaching. The study identifies a descending educational pattern: depth and precision decline as instruction shifts from basic needs toward higher-level human needs. This gap limits students’ ability to move beyond designing a functional shelter toward creating a meaningful place to live. The research concludes that residential design education requires fundamental revision moving beyond a purely physical and functional focus to seriously engage the human, cultural, social, and psychological dimensions of dwelling, so that design can respond to the multilayered complexity of everyday life.