Advancements in information technologies (IT) have enabled the ability to exchange knowledge within and across organizations through virtual teams. However, the ability to effectively communicate and share knowledge in virtual settings can become a difficult task due to the complex nature of both the virtual context and the technology used to support them. This paper argues that transactive memory theory can explain how mutual knowledge enhances virtual team performance. We present a conceptual model and theoretical propositions for the study of the relationship between transactive memory and mutual knowledge in virtual teams.