The purpose of this research is to understand how organizational unlearning directly affects the outcome at both levels (1) Organization—knowledge creation capability, (2) Individual—emotional regulation, and defensive routines among R&D employees. And to examine the mediator role of knowledge transfer. Data was collected from 359 employees from Indian auto components manufacturers and ancillary units through the method of stratified random sampling. SPSS and AMOS software were used to test the measurement and proposed model. The Structural equation modeling (SEM) results indicate that the knowledge transfer partially mediates the connection of organizational unlearning with knowledge creation capability, emotional regulation, and defensive routines at both levels. This study provides a new framework for R&D employees suggesting how unlearning enhances their outcomes through the examination of both direct and indirect paths of organizational unlearning, knowledge transfer as mediators and outcomes at both levels.