Real-world problems serve as authentic learning contexts for students to integrate science, technology, engineering, and mathematics (STEM) knowledge, enhancing their interest and fostering their identity in STEM. Primary school students' unfamiliarity with real-world problems can be addressed through community engagement; however, research in this area is insufficient. This study used self-determination theory (SDT) to examine and explain the effect of community engagement on student STEM interest and identity development. The mixed-methods sequential explanatory design was adopted, and two experimental groups were set up: community engagement (CE; N = 72) and non-community engagement (NCE; N = 69). The CE group reported significantly higher needs satisfaction levels with autonomy, competence, and relatedness and greater STEM interest and identity. The CE group also expressed that the autonomy encouraged them to learn beyond the classroom and helped them engage with the community; that they were able to build better products through iterations and feedback from users; and that they experienced meaningful learning by creating useful products for others. These findings support the pedagogical value of community engagement projects to foster autonomous motivation. This study explicates how young students' STEM interest and identity could be fostered using SDT contextualized as a community-based STEM engagement project. Through this study, educators worldwide are provided with practical suggestions on using the tested approach.