Professional development is thought to be most effective when teachers participate and collaborate in groups. The present study was to find the collaborative inquiry role in EFL teachers' professional development and their perceptions of collaborative inquiry benefits and challenges. In so doing, 185 Iranian EFL teachers were selected by convenience random sampling. The data were collected by Collaborative Inquiry Survey, Professional Development Questionnaire of Teachers, and collaborative inquiry interview and analyzed by multiple regression and constant comparative method. The findings indicated that collaborative inquiry affected teachers' professional development regarding learning environment, cooperation, and educational planning. Furthermore, nine themes emerged from the analysis of the collaborative inquiry benefits and challenges interviews, namely awareness of colleagues' interests and educational issues, collegial atmosphere for learning, new understandings and developing interactive activities, feeling confident about pedagogical competence, risk of losing face, unpredictable results, tight schedules, lack of discussion culture, and disinterest in changing (inflexibility). The findings highlighted the encouragement of teachers to be involved in collaborative learning, which has implications for policymakers and school staff.