The present study aims to investigate the effect of transformational leadership on psychological capital and organizational commitment. In addition, this study investigates the effect of psychological capital on organizational commitment. Furthermore, this study also investigates the mediating effect of psychological capital on the relationship between transformational leadership and organizational commitment under the lens of social exchange theory. Three hundred-fifty survey questionnaires were distributed among employees of the health sector to test the hypotheses of this study. We validated the proposed framework using the mediation technique. The results indicated that transformational leadership is significantly related to organizational commitment and psychological capital. Further, results also revealed that psychological capital is significantly related to organizational commitment. Moreover, the results also showed that psychological capital mediates the relationship between transformational leadership and organizational commitment. This study will be significant for the managers and employees in the health sector who need to understand that transformational leaders promote psychological capital, which ultimately enhances organizational commitment. Healthcare management should arrange training programs on transformational leadership styles for managers because transformational leaders gain their subordinates’ trust due to their devotion and contributions. The limitations of this study and future directions are also provided in the discussion section.