Digitalization holds significant potential to improve the efficiency, flexibility, and sustainability of District Heating (DH) systems. However, the transition toward digitalized DH is often constrained by challenges beyond technology—such as regulatory uncertainty, unclear business models, fragmented organizational capacity, and misaligned stakeholder incentives. This paper offers a comparative, qualitative analysis of how digitalization is adopted, perceived, and implemented in DH systems in Denmark and Sweden—two of the most mature DH markets globally. Based on expert survey data collected under the IEA DHC Annex TS9 initiative, the study explores adoption trends across operational, customer-facing, and strategic domains. Findings reveal that while digital tools like smart meters, Supervisory Control and Data Acquisition (SCADA) systems, and AI-based analytics are being introduced, systemic barriers, such as General Data Protection Regulation (GDPR) related constraints, lack of clear return on investment, and digital skills gaps, continue to slow progress. Denmark’s strengths in infrastructure and coordination contrast with Sweden’s more diverse but fragmented innovation landscape. The study identifies key enablers: tariff reform, regulatory sandboxes, and capacity building, and offers context-sensitive policy and strategic recommendations. These insights contribute to advancing digitalization in the DH sector and to shaping future research and policymaking in smart energy system transformation.