Enterprise 2.0 takes on the full benefits of Web 2.0 services and has great potential in delivering business benefits. Many organizations have invested in this platform yet many are still hesitant to the adoption of it. This research paper explores the use of Enterprise 2.0 and how it can be incorporated into the changing business environment. The paper delineates the principles of KM and draw inferences where the appropriate use of Enterprise 2.0 will improve knowledge sharing. The underlying principles of KM strategy and the desired transformation discussed, illustrates challenges and gaps in knowledge sharing. The subsequent discussion explores the identified gaps and proposed the appropriate use of Enterprise 2.0, based on social capital theory. The study will contribute to a deeper understanding of the coherence of Enterprise 2.0 and knowledge sharing and identify the potential areas of improvements through appropriate use of Enterprise 2.0.