Despite public administration’s growing interest in personnel diversity and ethical leadership, little is known about the effectiveness of ethical leadership in managing diverse public workforces. Can ethical leadership moderate the relationships between demographic diversity and key organizational outcomes? To answer, we synthesize four theories about demographic diversity, ethical leadership, and inclusion: social categorization theory, social exchange theory, social learning theory, and optimal distinctiveness theory. These theories illuminate the interrelationships between diversity, ethical leadership, and two types of collective organizational outcomes: affective commitment climate and race-based employment discrimination. Using panel data from the US federal government, feasible generalized least squares models indicate that racial diversity is negatively related to affective commitment climate and positively related to race-based employment discrimination. The results also show that ethical leadership beneficially moderates the associations of racial diversity with the two organizational outcomes. These findings suggest that ethical leadership aids public managers and personnel in racially diverse public agencies.