Transformational leadership has been touted as the type of leadership most prepared to manage diversity. By fostering an organization-based identity that creates a common in-group for all followers, transformational leaders are argued to motivate followers to contribute to the best interests of the group while mitigating intergroup biases and conflicts. Unfortunately, these dynamics have not yet been examined in the context of racialized hierarchies. When racial-ethnic inequalities exist, efforts to foster a collective identity have the potential to reinforce the devaluation of racial-ethnic minorities, thereby pressuring them to conform to oppressive organizational norms and leading to minority compliance. While minorities identification and compliance may both superficially achieve the desired intergroup processes, compliance has been shown to be detrimental to minorities inclusion and psychological wellbeing. Thus, we aimed to illuminate the influence of transformational leaders on the experience of racial-ethnic minorities in the workplace. Our findings support that transformational leaders are associated with fostering a value for diversity in organizations, which in turn predicts decreases in minority followers need for compliance behaviors. However, transformational leadership maintains a direct, positive effect on minority followers organizational identification. Thus, diversity ideology plays an important role in whether transformational leaders can foster an organizational identity without pressuring them to relinquish aspects of their racial identity while at work.