Purpose: The main objective of this research was to identify aspects of knowledge management and innovation systems and evaluate them in public libraries of Yazd province and investigate the impact of knowledge management on innovation.

Methodology: This research implemented in descriptive and inferential level. Data was collected by a researcher designed questionnaire. Research population includes All librarians of Yazd (from participatory and institutional) public libraries. At least 190 participants are needed to fill the questionnaire with 38 questions in structural equation modeling method. 230 public librarians randomly selected to fill questionnaire and 195 of them filled. Data were analyzed by Pearson's test,
one-sample T-test, structural equation modeling and path analysis.

Findings: Findings showed that all dimensions of knowledge management system factors except “creation and knowledge acquisition” have a significant impact on innovation factors. According to structural equation coefficients, "Technology and Structure" and "organizing, storing and sharing knowledge" had the greatest impact on innovation factors. Accordingly, results showed that “administrative” and “technical” aspects (variables) of Innovation system of public libraries in Yazd province was not in good condition by considering t-test coefficient measure.

Originality/Value: The value of this research is in the identification of weak factors in knowledge management and innovation system of Yazd City public libraries. “Creation and knowledge acquisition” factor in management system and “administrative” and “technical” factors in innovation system have non-significant mean that suggest a reappraisal in this elements.