<p>Although self-leadership is often regarded as a positive resource for enhancing individual effectiveness, its potential adverse effects in ethical dilemmas remain underexplored. Drawing upon Self-Determination Theory, this study examines the double-edged sword effect of self-leadership in two typical organisational contexts: temptation of personal gain and risk of loss. Two quasi-experimental studies with a single-factor between-subjects design were conducted among Chinese service sector employees (Study 1: N = 191; Study 2: N = 229). By manipulating the intensity of temptation and risk cues, the study investigated the underlying mechanisms linking inducements to ethical decisions and moral identity. The results indicate that neither temptation nor risk directly diminishes individuals’ moral identity; instead, they exert indirect effects through ethical decision-making processes. Critically, self-leadership emerged as a significant moderator in this pathway: individuals with high self-leadership were more prone to unethical decisions under inducement, thereby weakening their moral identity, whereas in the absence of inducement, they exhibited stronger ethical decisions. These findings uncover the moral risks associated with self-leadership under high-conflict conditions, challenge its traditionally positive conceptualisation, and offer novel insights for identifying and intervening in ethical governance within organisations.</p>