This study examines leadership factors that affect knowledge creation in Sri Lankan software industry. For this study, transformational and transactional leadership styles are considered and their effect on knowledge creation is assessed. Organizational culture is considered to have a moderating effect on the relationship between leadership behaviors and knowledge creation. The study is based on four variables; two independent variables, transformational leadership and transactional leadership, one moderating variable, organizational culture and one dependent variable, knowledge creation. According to the findings of the research with participant (n=152) feedback, both transformational leadership and transactional leadership have strong positive correlations with knowledge creation. Organizational culture moderates the correlation between transactional leadership and knowledge creation. Among the individual factors of transformational and transactional leadership, Individualized consideration has the highest positive correlation with knowledge creation. Organizational culture found to be moderating the knowledge creation through transactional leadership while culture has no moderating effect on knowledge creation through transformational leadership. The research suggests that affective leadership practices can positively contribute to the knowledge creation in software development organizations.