Background: In today’s dynamic and competitive environment, employee creativity is recognized as a key source of competitive advantage and innovation enhancement in organizations. Entrepreneurial leadership—an integration of entrepreneurial traits and transformational leadership—is introduced as a contemporary model for fostering employee creativity. This leadership style, through identifying emerging opportunities, accepting reasonable risks, and providing continuous support for innovation processes, creates an enabling environment for creativity to flourish. Meanwhile, psychological factors such as psychological empowerment and psychological safety play important mediating roles in strengthening and facilitating the effects of entrepreneurial leadership on employee creativity. Despite the significance of these mechanisms, their mediating effects, particularly within manufacturing industries, have received limited empirical attention. The main objective of this study is to examine how entrepreneurial leadership influences employee creativity through the mediating roles of psychological empowerment and psychological safety.

Methodology: This applied research employed a descriptive–survey design with a quantitative approach. The statistical population consisted of 118 employees from Iran Khodro and Saipa companies located in Gonabad, Mashhad. Using Cochran’s formula, a sample of 90 participants was selected through simple random sampling. Standardized questionnaires were used to measure the study variables. Reliability was confirmed through Cronbach’s alpha values exceeding 0.7, and content validity was approved by management experts. Convergent and discriminant validity were also verified using AVE and CR indices. Data analysis was performed using SPSS and SmartPLS software through structural equation modeling (PLS-SEM).

Findings: The results revealed that entrepreneurial leadership has a positive and significant effect on employee creativity (β = 0.294). Furthermore, entrepreneurial leadership positively and significantly affects psychological empowerment (β = 0.637) and psychological safety (β = 0.611). Psychological empowerment (β = 0.354) and psychological safety (β = 0.364) also have direct positive and significant effects on employee creativity. Mediation analysis demonstrated that both psychological empowerment (β = 0.225) and psychological safety (β = 0.222) significantly mediate the relationship between entrepreneurial leadership and employee creativity.

Conclusion: The study highlights that entrepreneurial leadership not only directly enhances employee creativity but also facilitates the creative process by fostering psychological safety and strengthening employees’ sense of competence, autonomy, and meaningfulness. Practically, organizations should prioritize the development of entrepreneurial leadership skills among managers and create supportive and empowering structures to provide a psychologically safe and motivating environment for employees. By validating the concept of entrepreneurial leadership across different cultural contexts, this study emphasizes the critical role of psychological factors in promoting organizational innovation. Entrepreneurial leaders, by cultivating a sense of empowerment and psychological safety, increase employees’ motivation and readiness for creativity—findings that offer strategic value for managers operating in turbulent and competitive environments.