This research examines digital literacy's role in supporting smart city development in Palembang City by focusing on four key aspects, including digital skills, digital safety, digital ethics, and digital culture. This study uses a qualitative descriptive approach to use primary and secondary data. The analysis tool used is Nvivo 12 Plus. These findings successfully analyze the challenges faced in integrating digital literacy in smart city development, including digital literacy gaps, privacy concerns, lack of awareness of benefits, technical challenges, and cultural changes. In addition, the role of government and regulation and cross-sector collaboration are also explained as important factors in creating an environment that supports holistic digital literacy. The results of this study provide a comprehensive view of how digital literacy can play a key role in facing challenges and optimizing the benefits of smart technology in the development of inclusive and sustainable smart cities. This research contributes to stakeholders involved in planning and implementing smart cities, as well as providing directions for effective digital literacy efforts in the future.