Creating and delivering products and services that promote sustainability is increasingly important in today’s economy. Novel services based on digital technologies and infrastructure can significantly contribute to sustainable development, as demonstrated by digitally enabled car-sharing services where increased asset utilization reduces production-related greenhouse gas emissions. However, there is still limited knowledge on how digital service innovation can purposefully be applied to promote sustainability. To address this gap, we conduct a systematic literature review and perform a qualitative inductive analysis of 50 articles on the impact of digital service innovation on social, environmental, and economic sustainability. We provide a comprehensive overview of real-world applications and identify five underlying mechanisms through which innovation with digital services can drive sustainable development. In doing so, we aim to pave the way to purposefully conceive, design, and implement digital services for sustainability.