Purpose-The aim of the study is to analyse the mechanisms of trust and reciprocity that impact knowledge exchange in IT outsourcing projects. The research participants develop a framework that shows the impact of the trust and reciprocity components on knowledge exchange in IT outsourcing projects. Design/methodology/approach-The study is a single-case study adopting a qualitative approach combined with a core action research methodology covering three action research cycles. Data was collected using two types of interviews: semi-structured and focus group interviews. The total number of conducted interviews was 45, covering managers, team leaders, and IT technical staff. An action research co-generative knowledge creation module was applied to provide a workable solution for the identified study question. Findings-The research participants identified four factors that make a significant contribution to reciprocity: a well-designed contract, client capability, operational readiness, and the client-vendor relationship. Four elements were found to have a significant impact on building mutual trust between the client and the vendor: a well-designed contract, vendor capability, transparency, and communication. The research participants found that two factors can assist in increasing the level of trust and the vendor's strengths during the IT outsourcing process. Those two assisting factors are external consultant support and top management support. Practical implications-The study provided an action research co-generative knowledge creation module that was applied to provide a workable solution for the identified study question. This module can enhance organisation learning through efficient knowledge exchange.