Purpose: The purpose of this study is to address the problematic yet under-researched issue of the disconnectedness of the temporary and permanent levels of organisation in project-based firms in terms of learning and innovation diffusion. Design/methodology/approach: The paper is based on a longitudinal case study of a pioneering French construction firm introducing the partnering method in France. Based on an abductive approach, the analytical framework combines insights of the literature on community and networks of practice to investigate the processes and mechanisms of diffusion of innovation in project-based firms. Findings: The function of semi-permanent organisational levels in connecting the temporary and permanent levels of the firm – the communities of practice (CoPs) and network of practice (NoP) exists besides the formal organization of the firm. As a social learning process, innovation diffusion involves both formal (i.e. vertical) and informal (i.e. horizontal) forms of organising and learning. Intermediary and informal ways of organising enables the embedding of innovation both in terms of content and connections. Foremost, CoPs/NoPs contribute to relational embeddedness. Boundary actors and objects are essential in crossing the different levels of embeddedness to overcome the learning boundaries between temporary projects and the permanent firm. Research limitations/implications: The investigation is built on a single case study and further empirical research is needed, preferably longitudinal case studies, as this allows greater capture of the diffusion process. The authors suggest further studies using practice-based perspectives to capture the formal and informal ways of organising innovation diffusion. Practical implications: Managerial interventions should favour the development of the informal dynamics of community and networks to foster both innovation and its diffusion. The managerial challenge lies in creating the right prerequisites for the existence of both the informal community logics of organising and the formal top management decision-making, and to orchestrate their timing in the diffusion process. Social implications: The study reveals the importance of both formal and informal networks in driving innovation. As such, project-based firms should be aware of these dynamics when striving for change. Originality/value: The study contributes to the literatures on diffusion of innovation, project marketing and construction management. It includes new insights related to the function of intermediary and informal organisational levels of project-based organisations, the dynamics and connection between the temporary and permanent levels of the project-based firm related to communities and networks of practice, and the boundary spanning activities that are involved between the formal and informal levels of the firm.