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This study examines the relationships between government funding and entrepreneurial outcomes in Saudi Arabia under Vision 2030, with particular emphasis on the mediating role of entrepreneurial capability. Drawing on the Resource-Based View and Institutional Theory, the study proposes that government funding is associated with entrepreneurial capability, which in turn is associated with entrepreneurial activity, innovation, and business sustainability. Using a quantitative cross-sectional design, data were collected from 384 entrepreneurs and owners or managers of small and medium-sized enterprises (SMEs) in Saudi Arabia with current or prior exposure to government funding programs. The measurement model demonstrated satisfactory reliability, convergent validity, and discriminant validity across the study constructs. Regression-based path analysis indicated a significant positive relationship between government funding and entrepreneurial capability (β = .59, p < .001). Entrepreneurial capability was also positively associated with entrepreneurial activity (β = .62, p < .001), innovation (β = .57, p < .001), and business sustainability (β = .54, p < .001). Bootstrapping with 5,000 resamples further indicated significant indirect effects of government funding through entrepreneurial capability on entrepreneurial activity (indirect effect = .37, 95% CI [.28, .46]), innovation (indirect effect = .34, 95% CI [.25, .42]), and business sustainability (indirect effect = .32, 95% CI [.23, .40]). These findings highlight entrepreneurial capability as a mechanism through which government funding is associated with entrepreneurial outcomes. The study contributes to the entrepreneurship and public financing literature by integrating resource-based and institutional perspectives within the context of Saudi Arabia’s economic transformation and offers practical implications for designing funding programs that combine financial support with capability development.