<p>The phenomenon of firm greenwashing behaviors challenges principles of business ethics. Scholarly inquiries have predominantly concentrated on the external pressures—such as stakeholder demands—that precipitate greenwashing practices, while the influence of a firm’s internal governance structures, which are decisive in curbing such conduct, has received insufficient attention. Departing from the conventional theories that either emphasize conflict-based faultline constraints or diversity-based faultline benefits, this study extends the faultlines theory by introducing a new construct of stakeholder supervision as both underlying mechanism and boundary condition and proposing a stakeholder supervision-based dual-effect theoretical framework to explore the bidirectional influence of board faultlines. Utilizing data from publicly listed manufacturing firms in China spanning 2011 to 2022 and based on the panel fixed-effect model, the study uncovers a U-shaped correlation between board faultlines and greenwashing behaviors. For the internal stakeholder supervision, the board supervision can be a mediating mechanism between them. Additionally, it identifies that external stakeholder supervision exerted by the media and investors can serve as a moderating force, capable of suppressing greenwashing behaviors irrespective of the board faultlines’ magnitude. This research offers significant practical implications on how to curb firm greenwashing behaviors by leveraging the board governance structure and regulating external supervision mechanisms. When establishing the board of directors, it is essential to carefully consider the diverse characteristics of its members to maintain an appropriate level of faultlines, thereby curbing firm greenwashing.</p>