Determining the optimal growth rate of government expenditures and its appropriate size is one of the key topics in the field of public economics. The amount of government spending and how it is allocated across different economic sectors directly and indirectly impacts macroeconomic variables such as Gross Domestic Product, economic growth, and employment. Due to its unique structure, Iran's economy places significant importance on the service sector, which serves as one of the largest economic sectors in the country. This sector plays a crucial role in job creation and meeting societal needs. Therefore, the primary objective of this study is to examine the impact of the optimal size of government on employment in Iran's service sector. In this research, the optimal control method was employed to determine the optimal size of government. The data used in this study spans the period from 1981 to 2019. After determining the optimal size of government, its effect on employment in the service sector was analyzed using the Autoregressive Distributed Lag (ARDL) model. The results indicate that the optimal size of government has a positive and significant impact on employment in the service sector in the short term (lags 1 and 2). Additionally, in the long term, the influence of the optimal government size on employment in this sector remains positive and significant. A comparison of the findings reveals that the impact of government size on employment under optimal conditions is greater than under current conditions. This finding suggests that focusing on determining and implementing the optimal size of government can contribute to improving employment indicators in the service sector. Overall, the results of this study demonstrate that proper management and optimal resource allocation by the government can enhance employment conditions and productivity in the service sector, ultimately contributing to the country's economic growth.