This study explores the impact of digital economy engagement and digital adoption on the entrepreneurship performance of Small and Medium Enterprises (SMEs) in Malaysia, with a specific focus on the PG Mall platform. Through an analysis of SMEs’ involvement in digital activities such as e-commerce, digital marketing, and data analytics, the research identifies key factors that enhance business performance. The main objective of this paper is to examines the mediating role of government policies in supporting digital adoption and fostering a conducive environment for digital entrepreneurship. This paper employed a quantitative method to examine the impact of digital economy engagement and digital adoption on the entrepreneurship performance of Small and Medium Enterprises (SMEs) in Malaysia, with a focus on the PG Mall platform. Through data analysis, this research assessed several hypotheses related to the relationship between digital engagement, adoption, and business performance. The findings revealed that the majority of the hypotheses were supported, confirming the positive influence of digital economy engagement and digital adoption on various aspects of entrepreneurship performance. Based on these findings, this paper also proposes a conceptual framework that highlights the elements of digital economy engagement and digital adoption that contribute to SME performance. This framework serves as a valuable guideline for government policymakers, practitioners, and scholars in shaping strategies to foster digital entrepreneurship. It underscores the importance of supportive government policies, such as financial incentives and training, in facilitating the digital transformation of SMEs. By providing a structured approach to understanding the role of digital tools in enhancing business outcomes, the framework offers a foundation for future research and policy development aimed at promoting digital entrepreneurship in an evolving economic landscape.