Small and medium enterprises (SMEs) are vital to economic growth but often struggle with employee motivation and performance due to resource constraints. Transformational leadership, with its emphasis on inspiration, intellectual stimulation, and individualized consideration, has been identified as a potential driver of enhanced motivation and organizational outcomes in such settings. This study aims to assess the extent to which transformational leadership influences employee motivation and organizational performance in SMEs and to explore employees’ perceptions of how these leadership practices foster or hinder their motivation. An explanatory sequential mixed-methods design was employed, involving a 5-point Likert-scale questionnaire administered to 100 SME employees for quantitative data, followed by semi-structured interviews with 20 purposively selected participants for qualitative insights. Data were analysed using frequency distributions, descriptive statistics, and thematic analysis. Results revealed moderately strong positive perceptions of transformational leadership, particularly in inspirational vision, role modelling, and individualized support, significantly enhancing motivation and perceived performance. However, intellectual stimulation was weaker due to operational constraints. Qualitative themes confirmed these enablers while highlighting resource-related barriers