Digital marketplaces have emerged as dominant platforms in the modern economy, transforming the way businesses create value, engage customers, and compete globally. By facilitating interactions between buyers and sellers through digital technologies, marketplaces reduce transaction costs, increase market reach, and enhance operational efficiency. This study examines the role of digital marketplaces in generating competitive advantage for firms. Drawing on theories of platform economics, resource-based view (RBV), and network effects, the research explores how digital marketplaces leverage data analytics, platform ecosystems, customer engagement, and innovation capabilities to achieve sustainable competitive advantages. A quantitative survey involving 450 marketplace users and business sellers was conducted to evaluate key factors influencing marketplace success. The findings reveal that network effects, customer trust, technological innovation, and ecosystem integration significantly contribute to competitive advantage. The study provides strategic recommendations for businesses operating within digital marketplace environments and highlights future directions for platform-based competition.