The adoption of Industry 4.0 technologies is crucial for Small and Medium Enterprises (SME) to maintain their competitiveness in global market. However, there is a regional economic disparity between Malaysian SMEs located at different regions especially in rural and urban areas, which may cause uneven adoption of Industry 4.0. This study examines these disparities by integrating the Technology Acceptance Model (TAM) and Technology-Organization-Environment (TOE) framework. A survey questionnaire was distributed to SMEs across Malaysia and the data was analyzed using SmartPLS 4. The findings indicate that technology readiness significantly influences perceived ease of use (PEOU) and perceived usefulness (PU), particularly in urban SMEs. Nevertheless, complexity unexpectedly affects PEOU positively, suggesting that prior exposure to technology reduces perceived difficulty. Additionally, management support is more impactful in urban regions with a path coefficient of 0.197, whereas resource availability is important for rural SMEs with a path coefficient of 0.164. Moreover, competitive pressure strongly drives adoption in rural areas with a path coefficient of 0.930, while government support also plays a critical role in urban settings technology adoption. These results highlight the need for targeted policies to reduce the urban–rural digital gap.