With the rapid growth of globalization, distributed teams have become increasingly common in organizations. This research investigates the impact of inter-subgroup dynamics on knowledge coordination in distributed teams. To address this research question, we extend and apply theory from two primary sources – Transactive Memory Systems (TMS) theory and the faultline model. The paper uses data collected from 22 distributed MBA student teams to provide several novel insights into how perceived faultlines impact team processes (knowledge coordination) and outcomes (team performance and member satisfaction). First, perceived faultlines reduce knowledge coordination, which is an important antecedent of team performance and member satisfaction. Second, knowledge coordination fully mediates the negative effect of perceived faultines on team performance and member satisfaction. Third, low levels of TMS not only impair performance, but also reduce member satisfaction in distributed teams. Implications for research and practice are discussed together with potential avenues for future research.