Digital transformation has emerged as a strategic imperative for organizations seeking to enhance their sustainable performance by integrating advanced digital technologies into business processes. This literature review examines the relationship between digital transformation and sustainable performance, focusing on the moderating role of artificial intelligence (AI) applications. The study explores how digital transformation fosters sustainability by improving operational efficiency, optimizing resource utilization, enhancing transparency, and promoting eco-friendly innovations. However, the effectiveness of digital transformation in achieving sustainability goals can be influenced by the integration of AI technologies, which catalyze data-driven decision-making, process automation, and predictive analytics. AI applications can enhance sustainability’s environmental, social, and economic dimensions by enabling organizations to develop smarter energy management systems, reduce waste, and optimize supply chains. Nonetheless, challenges such as ethical concerns, data security risks, and implementation costs may hinder the full potential of AI in moderating the relationship between digital transformation and sustainability. This review synthesizes existing research to highlight key findings, theoretical perspectives, and practical implications, identifying gaps that require further investigation. By shedding light on the role of AI in digital transformation, this study provides insights for academics, policymakers, and business leaders seeking to align digital innovation with sustainability objectives.