PurposeDrawing upon social exchange theory and self-determination theory (SDT), this study investigates the influence of psychological empowerment (PE) on innovative work behavior (IWB) among faculty members in Iraqi institutions of higher education. Additionally, this study aims to explore the role of inclusive leadership (IL) as a mediator between PE and IWB. Academic institutions are vital contributors to economic expansion through their research and the development of highly qualified graduate employees.Design/methodology/approachTo test the developed hypotheses, a quantitative approach was used with structural equation modeling via partial least squares (PLS-SEM) and bootstrapping estimation. The analysis was conducted using 497 responses.FindingsThe results of this study demonstrate that PE has a positive impact on IWB among faculty members. Furthermore, IL mediates the relationship between PE and IWB.Originality/valueThis study contributes to the existing literature by highlighting the significance of IL in encouraging employee participation in organizational change. The findings also suggest that IL plays a crucial mediating role in the relationship between PE and IWB among faculty members in Iraqi institutions of higher education.