Large suffusion and cover-collapse sinkholes, of up to 100 m in diameter, developed in the Lar valley in Iran. The sinkholes formed through overburden several hundred metres thick comprising coarse- and fine-grained deposits. The formation mechanism for these large sinkholes was studied based on the topography of the bedrock and on deep borehole log data. It could be determined that the large cover-collapse sinkholes are located above permeable bedrock berms and that they formed through a layer of fine-grained, cohesive soil that was both underlain and overlain by coarse-grained soil layers. The data analysis showed that suffusion from the coarse-grained layer at the bedrock and subsequent erosion of these particles through permeable zones in the bedrock to the karst channels caused settlement of these coarse-grained layers and the formation of open caverns above them, at the interface with the fine-grained layer. With continuing erosion, the caverns widened until the limit equilibrium of the fine-grained layer was reached and then collapsed to form a depression with a horizontal bottom surface, termed a cover-collapse sinkhole. An analytical model was developed for this mechanism, considering cohesive and non-cohesive soil layers. This analytical model confirmed that, for the given composition of the overburden, cover-collapse sinkholes of 80–100 m in diameter can be expected. The paper also analysed the formation mechanism of the suffusion sinkholes and it was shown that their formation took place through coarse-grained, non-cohesive formations, in this case alluvium and slope talus. Finally, it was analysed whether the formation of new cover-collapse and suffusion sinkholes after the rehabilitation of the reservoir leakage is likely.