As the diversity field evolves, scholars are shifting the attention from mitigating "problems" associated with diversity to searching for ways to leverage the potential value in diversity. We advance this field by studying how an inclusive climate benefits organizational innovation, an important foundation for sustained competitive advantage. Adopting a synergy perspective, we examine the internal (i.e., workplace demographic diversity in terms of age, gender, and region) and external contingencies (i.e., environmental scanning and environmental uncertainty) for an inclusive climate to foster incremental and radical innovation through the mechanism of knowledge management capacity. We tested our research model with a three-wave data collection from multiple sources (i.e., employees, human resource managers, and executives) in 102 organizations. We found that workplace age and regional diversity (but not gender diversity) strengthened the positive effect of inclusive climate on knowledge management capacity, and subsequently incremental and radical innovation. The facilitating effect of environmental scanning was only significant for organizations that experienced higher environmental uncertainty. Our research highlights the importance of considering the synergistic potential of internal human resources and external environments for organizations to capitalize on their inclusive climate for knowledge management and innovation.