In the current era of a dynamic environment, organizations need to continuously innovate and transform to remain competitive. Digital transformation is an essential driver across organizations, including small and medium-sized enterprises (SMEs), reshaping organizational agility. This research examines the interconnection among knowledge sharing, digital transformation, open innovation, organizational agility, and transformational leadership. A quantitative research design was employed, using an online survey with data collected from 543 participants selected through a stratified random sampling from SMEs in China. Data were analyzed by utilizing partial least squares structural equation modeling. The results include a significant impact of knowledge sharing on digital transformation, digital transformation on open innovation, and open innovation on organizational agility. Additionally, digital transformation and open innovation were found to significantly mediate the relationship between knowledge sharing and open innovation and organizational agility. Moreover, transformational leadership significantly moderated the impact of digital transformation on open innovation. The model explained 67.7% of the variation in organizational agility. The research provides a holistic model for SMEs aiming to leverage information sharing, technological integration, and leadership practice to improve flexible and innovative systems, contributing to theoretical understanding and practical solutions to sustainable resilience.