Recently, the use of humor by leaders as a management technique has raised expectations among practitioners that it will have positive effects on organizations. However, compared to the relatively active research on humor conducted in the fields of nursing, psychology, education, and advertising, systematic research on the use of humor and its effects in the management field remains insufficient. The reasons for the lack of research in management can be broadly attributed to two factors. First, the concept of humor itself is complex and encompasses diverse attributes, making it difficult to establish a clear conceptual definition. Second, a more direct reason for the lack of humor research in management is related to the dual nature of humor's effects. Because humor has both positive and negative effects, it is difficult to easily predict the outcomes of humor. This study aims to expand the limited understanding of humor as a management technique while considering its complex and dual nature. Specifically, this study examines when and how a leader's use of humor can contribute to organizational members' performance and happiness, and through the findings, seeks to bridge the gap between practical interest and academic understanding. To this end, this study established and tested a mediated moderation model that considers trust in the leader as a moderator and members' positive psychological capital as a mediator in the relationship between leaders' humor use and members' performance and happiness. The empirical analysis of data obtained from 949 members working in public enterprises yielded the following results. First, trust in the leader significantly moderated the relationship between leaders' humor use and members' performance and happiness. Simple slope tests revealed that when trust in the leader was high, leaders' humor use was positively linked to members' positive psychological capital and happiness at work. Conversely, when trust in the leader was low, leaders' humor use showed negative relationships with members' positive psychological capital, performance, and happiness. Second, positive psychological capital was found to mediate the interaction effect of leaders' humor use and trust on members' performance and happiness. Through discussion and conclusions, the theoretical and practical implications of this study are discussed, and limitations and future research directions are presented.