This study investigated the relationship between innovation strategies and business profitability among small and medium enterprises (SMEs) in Lubaga Division, Uganda. The study was premised on the observation that many SMEs in Lubaga Division were grappling with declining profitability despite operating in a growing urban market, raising questions about their competitive strategies. A cross-sectional research design was adopted with a quantitative methodology. Using stratified random sampling, 210 SME owners and managers were selected from a population of 580 registered businesses. Data were collected via a structured questionnaire achieving a response rate of 86.2%. Analysis employed descriptive statistics, Pearson correlation, and hierarchical multiple regression using SPSS Version