Harnessing tacit knowledge rooted in use experience and exploiting it for innovation is a major challenge for firms. This paper explores ‘embedded users’ as a mechanism to extract and utilize such knowledge for innovation. Embedded users are firm employees, who are also users of the firm's products. They are embedded into the firm and into the use context outside the firm, and also integrate need and solution‐related knowledge. Owing to these characteristics, embedded users are very capable of innovating. We shed light on this hitherto under‐researched phenomenon and explore how embedded users contribute to corporate innovation. More specifically, we explore the resources and capabilities that they deploy during the innovation process. We use interview data from 23 firms (35 interviews) in the sporting, leisure, and individual healthcare industries. Our findings show that embedded users draw on knowledge resources (use knowledge, solution knowledge, and organizational knowledge) and social resources (structural, relational, and cognitive capital) relevant for innovation. They deploy specific capabilities during all phases of the innovation process, that is, during ideation (idea generation, external information absorption, and competitive intelligence), development (specification setting and testing), and marketing (company representation and opinion leadership). We contribute to the literature by showing that user activities are not only relevant outside, but also within the organization. We also show that employees can access use‐related resources for innovation and that they act as boundary spanners for need knowledge.