The shift to Industry 5.0 and sustainable smart manufacturing will require new governance and decision-making paradigms within digital manufacturing systems. To address this need, this work suggests that the incorporation of blockchain technology and Distributed Autonomous Organizations can be a disruptive approach to enhancing operational effectiveness, supply chain transparency, and data security in smart manufacturing. DAOs, made feasible by blockchain’s decentralized and transparent architecture, present a promising possibility for redefining cooperation and decision-making across stakeholders. The combination of the two generates a framework in which the inalterability and traceability of blockchain are used to guarantee supply chain transparency and data integrity, while the collective intelligence and democratic governance of DAOs are used to increase operational efficiency and sustainable practices. The proposed approach empowers stakeholders to participate in decision-making processes, fostering a collaborative ecosystem that optimizes resource allocation, minimizes waste, and promotes circular economy principles. By exploring real-world use cases and implementation strategies, this paper sheds light on the potential of block-DAO integration to address critical challenges in smart manufacturing, such as supply chain complexities, data silos, and environmental concerns. Additionally, it delves into the implications for data security and privacy, outlining robust mechanisms to safeguard sensitive information while maintaining transparency. Ultimately, this research paves the way for a sustainable and resilient smart manufacturing paradigm, where operational efficiency, supply chain transparency, and data security are seamlessly integrated through the synergistic combination of blockchain and DAO technologies. The proposed work provides a comprehensive guide for researchers, industry professionals, and policymakers seeking to leverage cutting-edge technologies for sustainable development in the manufacturing sector. The overview of the above real-world use cases and implementation strategies provides valuable insights into the possibility of block-DAO integration to address key challenges of smart manufacturing, including the complexity of supply chains, data silos, and environmental issues. Moreover, possible implications for data security and privacy and corresponding mechanisms to ensure protection and transparency are discussed. Thus, this research contributes to the creation of a stable and sustainable paradigm of smart manufacturing in the future, in which operational and supply chain aspects and data security are integrated through blockchain and DAO.