This essay provides a literature review examining the relationship between authentic leadership, Leader-Member Exchange (LMX), and employee psychological capital (PsyCap). It explores how authentic leadership forms the basis of positive organizational behavior, enhancing psychological capital and boosting organizational climate. The essay discusses how authentic leadership, LMX, and PsyCap are interrelated, shaping psychological climate perceptions and improving job satisfaction, commitment, and employee engagement. It also examines ways to build PsyCap in employees, focusing on motivation, resilience, optimism, and self-confidence, and how emotions impact employee performance. The analysis concludes that psychological capital can be developed through adequate leadership, leading to improved employee performance and organizational success.