Perceived overqualification (POQ) is traditionally conceptualized as a state wherein employees possess educational attainments, professional experience, and technical skills that markedly surpass the requirements of their occupational roles. Evidence derived from practice suggests that, as the prevalence of overqualification intensifies and team heterogeneity becomes increasingly pervasive, the distribution of overqualification across distinct teams manifests observable discrepancies. In response to this phenomenon, scholars have proposed the concept of perceived overqualification differentiation (DPOQ) to capture this phenomenon and suggested that DPOQ can effectively reflect the distribution of knowledge, education, and skills in a team, and further influence team dynamics by shaping the team′s social context. Nevertheless, the extant body of literature has yet to converge on a unified interpretation of the intricate relationship between DPOQ and team outcomes. Some negative scholars argue that the DPOQ may lead to the creation of “stigmatization chains” that undermine positive team processes. Conversely, proponents of the more optimistic perspective highlight the potential “bright side” of DPOQ, asserting that it may enhance team-level outcomes by augmenting human capital advantages and bolstering team cohesion. Consequently, a unidimensional negative or positive perspective cannot fully reveal the relationship between DPOQ and team outcomes, and there may be complex influence mechanisms and boundary conditions.Drawing upon the categorization-elaboration model, this study explores the dualistic, paradoxical impact of DPOQ on team creativity through the analytical lens of knowledge management. By employing a multi-source, multi-temporal research design, the study collected survey data from 423 individuals nested within 99 distinct teams. Mplus software was used to test it through structural equation modeling. The following conclusions were ultimately drawn: First, DPOQ exerts a facilitative influence on team creativity by enhancing the expertise dimension of the transactive memory system through the information interpretation process. Second, DPOQ simultaneously exerts a deleterious influence by undermining the trust and coordination dimensions of the transactive memory system through the social categorization process, further impeding team creativity. Third, the practice of developmental human resource management modulates the mediating path between expertise and trust. In other words, when the intensity of the practice of developmental human resource management is elevated, the positive effects of DPOQ on team creativity, mediated through expertise, are magnified, while the negative impact of DPOQ on team creativity through trust can be suppressed.The theoretical contributions of this study are fourfold. First, it transcends the traditional individual level of previous research on the POQ and expands the study of POQ from the individual level to the team level. Second, this study reveals the double-edged nature of DPOQ’s impact on team creativity from a knowledge management perspective, thereby encouraging the academic community to adopt a more dialectical perspective. Third, by disentangling the complex influence mechanisms underpinning DPOQ’s relationship with team creativity, this study enriches the broader discourse on team diversity. Fourth, this study confirms that developmental human resource management practices have a certain corrective effect and can effectively mitigate the negative impact of unfavorable organizational phenomena, thereby broadening the scope of research on developmental human resource management practices in the field of organizational behavior.In terms of practical implications, this study offers several actionable insights. First, team managers and human resource management professionals must recognize DPOQ as a “double-edged sword”. To preempt the detrimental effects of the social categorization effect between overqualified employees and general employees, team managers and human resources professionals should reduce the DPOQ when recruiting or forming teams. Second, team managers should prioritize enhancing the transactive memory system by cultivating robust communication, trust, and coordination mechanisms, thereby amplifying the positive ramifications of DPOQ on team creativity. Finally, the establishment of developmental human resource management practices, tailored to address the divergent developmental needs of overqualified and general employees, can serve to counteract the negative impacts while simultaneously amplifying the positive outcomes associated with DPOQ.