Purpose The main purpose of research is to examine the relationships between diversity management and organizational performance along with the fostering role of leadership dimensions. Methodology Diversity management practices have been measured using the EPDMP scale on a sample of 514 employees from organizations across Pakistan and data were collected from employees of universities. The PLS-SEM was used as the main technique for data analysis. Findings Results show that higher workforce diversity does not automatically produce inclusive climate-specific diversity inclusive leadership dimensions are required to support diversity environment where employees feel valued and appreciated. Further, the results confirm that the diversity-inclusive leadership dimensions moderate the relationship between diversity management and organizational performance. Conclusions The study concluded that diversity management has a positive and significant direct impact on organizational performance. Therefore, policymakers need to devise human resource statutes, rules, regulations, policies, and practices that promote a heterogeneous workforce in organizations and offer equal opportunities to all employees unrestricted by individual employee identities such as gender, race, ethnicity, education, religion, function, and abilities. Practical implications The findings are very helpful for HR managers for effective diversity management to enhance their organizational performance. Originality/value: The study explains the association of diversity management practices and organizational performance and moderating role of diversity leadership dimensions.