Leadership is one of the most important components of management in any business unit. An organization with good leadership tends to have a better chance to survive in todays’ competitive environment. This paper considers the effects of leadership style on innovation in one of the biggest automakers in Iran named Iran Khodro. The proposed study of this paper designs a questionnaire and distributes it among a sample of 278 regular employees and 61 middle level managers of this firm. The results of the survey indicate that there is a meaningful difference between leadership style and standard leadership style among middle level managers when the level of significance is five percent. In addition, there is a meaningful difference between innovation and its components with standards among regular employees. Finally, leadership has positive and meaningful impact on employees’ innovation.