This study develops and tests a conceptual model of followers’ perceptions of transformational leadership as an antecedent to their innovative behavior in organizations. Specifically, we hypothesize that followers’ innovative behavior can be directly and indirectly influenced by their perceptions of transformational leadership. Knowledge sharing has a mediating effect and followers’ psychological capital has a moderating role in the relationship between transformational leadership and followers’ innovative behavior. A total of 212 employees from a diverse range of industries filled out questionnaires. Hierarchical linear modeling is used to analyze the relations. Results reveal that transformational leadership produces positive and significant impacts on followers’ innovative behavior and this relationship is fully mediated by knowledge sharing. Results also indicate that the positive relationship between transformational leadership and followers’ innovative behavior is enhanced only when followers possess high psychological capital. This paper adds to innovation literature by empirically testing the moderating role of psychological capital and the mediating role of knowledge sharing on the link between transformational leadership and followers’ innovative behavior. Implications of the findings for theory, research, and practice are discussed.