Going offshore has become a norm in current software organizations due to several benefits like availability of competent people, cost, proximity to market and customers, time and so on. Despite the fact that Global Software Engineering (GSE) offers many benefits to software organizations but it has also created several challenges/issues for practitioners and researchers like culture, communication, co-ordination and collaboration, team building and so on. As Requirements Engineering (RE) is more human intensive activity and is one of the most challenging and important phase in software development. Therefore, RE becomes even more challenging when comes to GSE context because of culture, communication, coordination, collaboration and so on. Due to the fore mentioned GSE factors, requirements’ understanding has become a challenge for software organizations involved in GSE. Furthermore, Knowledge Management (KM) is considered to be the most important asset of an organization because it not only enables organizations to efficiently share and create knowledge but also helps in resolving culture, communication and co-ordination issues especially in GSE. The aim of this study is to present how KM practices helps globally dispersed software organizations in requirements understanding. For this purpose a thorough literature study is performed along with interviews in two industries with the intent to identify useful KM practices and challenges of requirements understanding in GSE. Then based on the analysis of identified challenges of requirements understanding in GSE both from literature review and industrial interviews, useful KM practices are shown and discussed to reduce requirements understanding issues faced in GSE.