Despite the mounting evidence that leadership can fuel the innovation behavior of employees, yet no study considered the psychological state of employees in such a relationship while Psychology is the primary root of human feelings and behavior. In this regard, this study uses the integrative approach of transformational leadership theory and positive psychology to uncover the pivotal role of positive psychological capital (PsyCap) and perceived effort-reward fairness in the relationship between transformational leadership (TFL) and employee’s innovation behavior. Data collected from 14 banking institutions operating in Rwanda (412 total respondents) were analyzed using structural equation modeling and findings support our hypothesized model