Employing the Third Space as a theoretical framework, the present study explores how the teacher and transnational students co-constructed a transformative Third Space in their fifth-grade Korean heritage language classroom. The teacher implemented transnational literacy practices and transformative pedagogy by embracing the students’ linguistic hybridity and cultural diversity from their dynamic transnational lifeworld. The findings reveal that transnationally inclusive literature works as a great medium and a powerful pedagogical tool for the students in utilizing their transnational funds of knowledge, incorporating translanguaging, and (re)constructing their multifarious identities. The fluid classroom discourses during their literature discussions provided possibilities and opportunities for the Third Space to be established and developed in the classroom as a hybrid, transformative, and democratic learning space. This study provides educators and researchers insights into the unique ways that both teachers and students can collaboratively create Third Spaces in learning contexts to offer hybrid, transformational, and democratic educational experiences.