<p>The rapid growth of digital technologies has reshaped the tourism industry, with augmented reality (AR) emerging as a powerful tool for enhancing tourist experiences and driving business innovation. This study examines the role of AR adoption in fostering the digital transformation of eco-smart tourism ventures, with a particular focus on the mediating role of tourist engagement. Guided by the Stimulus–Organism–Response (S-O-R) theory, the research explores how AR adoption stimulates immersive experience, environmental awareness support, cultural enrichment, trust, perceived sustainability value, and innovation orientation, ultimately influencing tourist engagement and digital transformation. The study employed a quantitative research design, collecting data through structured questionnaires distributed to small and medium eco-smart tourism ventures across Malaysia. A total of 367 valid responses were analysed using AMOS - Structural Equation Modelling (AMOS-SEM) to test hypothesized relationships and mediation effects. The findings reveal that AR adoption significantly enhances immersive experience, environmental awareness, cultural enrichment, perceived sustainability value, and innovation orientation, while trust was found to be insignificant. AR adoption positively influences both tourist engagement and digital transformation, with tourist engagement serving as a complementary mediator between AR adoption and digital transformation. These results highlight the strategic role of AR not only as an immersive tool but also as a catalyst for sustainable digital transformation in tourism. The study contributes theoretically by extending the S-O-R framework into AR adoption research and practically by offering insights for tourism entrepreneurs and policymakers to leverage AR for innovation, sustainability, and competitiveness.</p>