Sustainable residential development requires a balance between the increasing demand for housing and the efficient use of materials and resources. The increasing use of industrialized building systems (IBSs) through new building techniques and materials holds high potential as an optimum construction alternative. Although considerable research has been conducted on industrialized buildings, very few studies have focused on low- and mid-rise residential buildings. Therefore, this paper aims to fill this gap. An extensive literature review was conducted to identify the critical success factors (CSFs) followed by an interview to discuss and validate the collected factors. This study resulted in twenty-six factors grouped into five CSFs comprising planning and control, roles and responsibilities, policies and incentives, industry maturity and technology advancement. In addition, 219 survey responses were collected and analyzed. Three factors were perceived differently among organizations including commitment toward IBS policy, implementation of preferential policy for IBSs and imposition of higher taxes on waste dumping. The top five CSFs were early planning to implement IBSs, extended training for local labor, effective communication among project players, project location evaluation and accessibility and standardized design concept adoption. The findings of this paper will help policymakers to review current practices and help develop a roadmap for sustainable IBS development for all industry organizations. © 2022 by the authors.