The mechanism of knowledge transfer and the process of knowledge diffusion provide realistic approach of realizing upgrading for the suppliers in the global production networks (GPNs). The leading companies will transfer the knowledge to the suppliers or not by comparing the marginal revenue with the marginal cost of knowledge transfer. The specific methods of knowledge transfer in the GPNs include direct investment, supply of equipment, technology aid, counter projects, etc.. The process of knowledge diffusion in the GPNs involves four steps such as socialization, externalization, combination and internalization.