The adoption of the Internet as a business strategy tool is becoming an important way for firms to expand their business through innovative strategies. This study provides an insight concerning the factors that influence the adoption of the Internet to support business activities, also known as e-business among SMEs in Malaysia. In addition, the study also examines the relationship between e-business adoption and the business performance of the SMEs. Using a structured survey questionnaire, a usable response was received and statistically analyzed from 177 SMEs that currently use e-business. The research found that organizational characteristics, technology characteristics and environmental characteristics influence e-business adoption and that the adoption of e-business has a direct influence on the business performance of the SMEs. The findings of this study can aid and encourage the SMEs in developing countries to build a competitive advantage by using the Internet in their business strategy practices.