Digital leadership has emerged as a critical success factor for small and medium enterprises (SMEs) in the digital economy. The rapid adoption of digital tools, automation, and online platforms has transformed traditional business operations and employee work practices. This study examines the influence of digital leadership on employee performance in Indian SMEs. Primary data were collected from 180 employees working in manufacturing and service-based SMEs through a structured questionnaire. The study analyzes the impact of digital vision, technological support, communication effectiveness, and innovation culture on productivity, job commitment, and adaptability. The results indicate that digital leadership significantly enhances employee efficiency, engagement, and willingness to embrace organizational change. The findings suggest that SMEs led by digitally competent leaders achieve improved workforce performance and sustainable competitive advantage.