Abstract: As an enterprise adapting the dynamic environment, strategic transformation plays an important role in enterprise sustainable development. Moreover, as a capacity which can alter enterprise’s other capabilities, enterprise’s dynamic capabilities have an important effect on the strategic transformation. Therefore, the process mechanism of strategic transformation is analyzed based on the dynamic capabilities theory. The dynamic capabilities in the context of strategic transformation can be divided into four components including environmental sensing capability, learning and absorptive capability, changing and renewal capability as well as integrating and reconfiguring capability. Then a conceptual model for the relationship among dynamic capabilities, transformational factors and subsequent performance is brought forward. Based on a longitudinal case study, it is shows that (1) the premise and key factor for implementing a strategic transformation successfully under the dynamic environment is to possess the dynamic capabilities matched with the environment, which will affect key elements of strategic transformation and further determine the final performance; (2) The dynamic capabilities will influence the strategic transformation in a continuous and improved way, and as a result, the succeeded transformation can be achieved only through the sustainable and increased dynamic capabilities cultivated by the enterprise.