Work teams have gained increasing importance as businesses shift to knowledge-based organizational structures. At the same time, advances in information technology have facilitated this change by enabling virtual work environments. To add to this complexity, the increasing demographic diversity of workers is coinciding with the rise in virtual and knowledge-based work environments. Therefore, it is critical that we understand the impact of these changes as they coincide in organizations today. One of the extolled virtues of work teams is their potential to combine the unique knowledge held by individual workers, integrating these knowledge resources to bear on productive tasks. To effectively utilize their distributed knowledge, work teams have to perform three basic knowledge-processing activities: (a) knowledge acquisition; (b) knowledge integration; and (c) knowledge creation. However, work teams often have difficulty processing their distributed knowledge. The ability of team members, or lack thereof, to work effectively with each other is usually the problem. The increasing demographic diversity of workers presents similar challenges for organizations. Demographically diverse workers have more unique knowledge, leading to increased knowledge differentiation in work teams. A work team that has high knowledge differentiation is one whose members possess different expertise. The unique knowledge held by individual team members effectively enlarges a work team's pool of knowledge resources. However, the increasing demographic diversity of workers often results in work teams having more difficulty processing their distributed knowledge because team members are not able to work effectively with different others. That being the case, the potential for demographically diverse work teams to more effectively perform productive tasks is lost. We realize that demographically diverse work teams are a special (and important) case of teams in that they are both high on differentiated knowledge and high on the potential for conflict and other process losses. However, with an increasingly global marketplace, this special case is quickly becoming commonplace. Therefore, it is critical that we find ways to help demographically diverse work teams limit their process losses and realize their full potential. Virtual work environments only heighten the need for demographically diverse work teams to minimize their process losses. Team members are often separated by both geographic space and time, which makes it even more challenging for them to work effectively with each other. In such environments, team members are often isolated from one another and find it difficult to feel a part of their team. Interestingly, computer-mediated communication has been shown to enhance team performance by helping team members communicate more effectively with each other. In fact, empirical work by Bhappu, Griffith, and Northcraft (1997) suggests that computer-mediated communication can actually help demographically diverse work teams process their distributed knowledge more effectively. In this chapter, we will discuss the effects of demographic diversity and virtual work environments on knowledge processing in teams. More specifically, we will describe when computer-mediated communication is likely to enhance knowledge processing in demographically diverse work teams and when it is not. In doing so, we hope to provide both workers and managers with a set of guidelines on how to best navigate these organizational changes.