The current digital transformation of society prompts the reshaping of both the private and public sectors and involves technology, organizations, and people. In this paper we explore within which application areas municipalities use IoT and how the implementation of IoT in this context triggers change and enables smarter cities. Based on an interview study of 337 municipalities in Denmark, Estonia, Finland, Norway and Sweden, our study portrays that the public sector is in its early stages of exploring IoT and reveals several application areas within the smart city sphere where new value has been created. Application of IoT was shown to trigger municipal digital transformation by increasing contextual awareness, enabling data-driven value creation, the reimagining of organizational structures, and innovation oriented financing. Such direct and indirect activities and practices were altogether shown to enable smarter cities. For the public sector to reap the benefits of potential digital transformation, it is however imperative to chal lenge current, and common, work practices. Otherwise, they risk getting caught up in incremental changes. Digital transformation involves radical changes, which in turn require technology to be fully integrated in processes and services and aligned with cultural expectations. Such changes require substantial support and commitment from stakeholders and a pronounced understanding of the value new and emerging technologies create.