Open AccessWe are living in an era where our capacity to intelligently use knowledge basically determines the future. Knowledge management is designed to present strategy, process, and technology to increase organizational learning and performance. In addition, it can help to develop the organizational innovation capacity. While there are a lack of research on the relation between knowledge management and innovation capacity in Iranian organizations, this study aims to identify any effect of knowledge management processes on innovation capacity. This study applies the structural equation modeling (SEM) to examine the research framework which was based on a survey of 240 knowledge workers from 30 manufacture factories in Iran. The results show that four of seven processes of knowledge management include knowledge creation, knowledge organization, knowledge dissemination, and knowledge application were strongly associated with factories innovation capability. Other three knowledge management factors include knowledge identification, knowledge storage, and knowledge collection that were recognized as factors not associated with those factories innovation capability. The results of this research paper can be used by managers to implement their knowledge management process more effectively in order to increase their innovation capacity.