Despite the growing importance and popularity of new digitally enhanced making and design environments, students' knowledge creation is still a fairly unexplored issue within these contexts. To address this research gap, we have drawn on empirical case study data from a public school that is implementing a novel making and design environment called the FUSE Studio. Our data comprise 111 hours of video records of 9–12-year-old students' (N = 94) making and design activities collected during one semester. Drawing from sociocultural and cultural-historical theorizing with a specific focus on the concepts of funds of knowledge and knowledge creation, we ask: 1) How are students' funds of knowledge manifested in the FUSE Studio? 2) How do students' funds of knowledge mediate their knowledge creation activity? "Funds of knowledge" refers to a student's multiple cultural resources that stem from their life worlds in and out of school. Our findings indicate that students' knowledge creation includes vertical knowledge maintenance, horizontal knowledge breaking, and knowledge expansion. The latter involves a tension-laden socio-materially mediated process that opens up opportunities for the creation of innovative solutions and expansion of a student's existing funds of knowledge.