The current research study investigated the significance of internal marketing (IM) to enhance faculty innovative behavior (FIB) and faculty engagement (FE) in higher education (HE). Furthermore, the mediation of FE in the association between IM and FIB has been investigated. Three hundred teachers from three major public sector universities in union territory (Jammu and Kashmir) in India have been contacted to gather responses. The study contributes in numerous ways to the literature—dimensions of IM have a significant and positive impact on FIB in the HE sector. FE significantly mediated the effect of IM and its dimensions on FIB. This study also enlarged the scope of social exchange theory by using it from faculty perspectives in HE. Furthermore, the study has made an attempt to modify the scale to measure constructs for making them suitable in the HE sectors. Research findings offer numerous suggestions for administrators in HE institutions.