•Provides a systematic literature review of digital transformation at the individual, firm, and macro levels and its impact on firms’ internationalization.•Digital transformation has the potential to facilitate internationalization.•Several advantages and disadvantages related to digitalization at the individual, firm, and macro levels exist.•Challenges and limitations in theories on digitalization and internationalization of firms are identified.•Areas for future research on digital transformation and firm internationalization are proposed. Digital transformation has a significant impact on firm internationalization. This paper aims to provide a systematic literature review to analyze two decades of literature on key issues related to digital transformation at the individual, firm, and macro (international) levels and its impact on firms’ internationalization process. We show the impact of human (soft side) and non-human components (i.e., knowledge, leadership, digital servitization, technological) of digital transformation that can either allow or threaten it and their impact on firms’ internationalization. In addition, our findings show that digital transformation can positively and negatively impact firm internationalization at the individual, firm, and macro levels. Moreover, we review the existing theories related to digital transformation and internationalization and identify the current gaps in these theories. Finally, we provide directions for future research to address these gaps.