<p>Grounded in emotional labor (EL) theory, this study investigates how benevolent leadership (BL), a compassionate and ethically driven form of stewardship, fosters leaders’ psychological well-being and effectiveness within Ethiopian public universities, with leaders’ surface acting and deep acting as mediators and subordinates’ Big Five personality traits as moderators. Data were obtained through a two-wave survey design (<i>N</i> = 319) administered to employees of a selected public institution using simple random sampling to ensure representative participation. Hayes’s PROCESS macro in SPSS (Model 4) was employed to test parallel mediation, and Model 7 was used to assess moderated mediation effects. The findings show that BL is positively associated with leaders’ psychological well-being and effectiveness, with this relationship significantly mediated by both leaders’ surface acting and deep acting. Specifically, BL fosters greater engagement in deep acting while reducing reliance on surface acting, thereby enhancing leaders’ psychological well-being and overall effectiveness. The results further reveal that subordinates’ Big Five personality traits moderated the relationship between BL and leaders’ surface acting and deep acting, except for openness to experience. Specifically, high extraversion strengthened the BL–leaders’ deep acting link, while low agreeableness weakened it. High conscientiousness reduced leaders’ reliance on surface acting, and high neuroticism weakened leaders’ surface acting but amplified deep acting. Our findings enrich leadership research by integrating BL, subordinate personality traits, and leaders’ EL, while emphasizing the ethical and emotional challenges leaders encounter. The study provides practical insights for promoting leaders’ psychological well-being and sustaining effective leadership in high-stress environments.</p>