The paper presents insights into the knowledge creation process in three Icelandic knowledge-intensive small and medium-sized enterprises (SMEs). Data were obtained through a case study methodology. The findings indicate that the three knowledge-intensive companies use complex, non-routine knowledge to deal with complex problems. Often, practical problems are a starting point for new ideas and knowledge development. Brainstorming, collaboration, teamwork, informal and formal gathering and other knowledge creation activities are used in the knowledge creating process. The companies showed many characteristics of SMEs with little formal structure and strategies. The subject of knowledge creation has received little attention in the literature. Thus, the study responds to this situation by giving insights into the knowledge creation processes in knowledge intensive SMEs.