Leader performance expectation (LPE), as one of the important sources of external expectations for employees, plays an important role in shaping employees’ attitudes and behaviors. Research on LPE mainly follows the line of self-fulfilling prophecy in the field of psychology, arguing that LPE can promote employees’ self-expectation and self-efficacy, increase work efforts, and improve performance. Few researchers have explored the potential dark side of LPE, revealing that such expectation will increase employees’ impression management concerns, reduce interaction with leaders, and damage task performance. However, the comprehensive impacts of LPE and its underlying mechanisms remain unclear. In this study, we explore the effects of LPE on employee work outcomes, aiming to provide a more nuanced understanding of LPE. Drawing upon the conservation of resources theory and cognitive appraisal theory, this study proposes a dual-path model of LPE to explore how it affects employees’ emotional exhaustion and work efforts. Specifically, based on the conservation of resources theory, we propose that LPE will affect both the processes of employees’ resource generation and loss: On the one hand, high LPE conveys leader’s recognition of employees’ ability and satisfies their need for competence (i.e., perceived competence), thereby reducing emotional exhaustion and improving work effort; on the other hand, high LPE sets stricter work goals and standards for employees and increases performance pressure, resulting in emotional exhaustion and reduced work effort. This study also identifies employee regulatory focus as the boundary condition of LPE’s effects. We propose that employees with promotion focus, centered around ideals and advancements, are inclined to interpret LPE a manifestation of recognition and confidence in their own abilities. Consequently, promotion focus can strengthen the relationship between LPE and perceived competence as well as the indirect effect of LPE on emotional exhaustion and work effort via perceived competence. Further, prevention focus, characterized by its emphasis on avoiding losses and preventing suffering, prompts employees to ponder the negative consequences of failing to meet high expectations expressed by LPE. As a result, prevention focus has the potential to strengthen the relationship between LPE and performance pressure as well as the indirect effect of LPE on emotional exhaustion and work effort via performance pressure. To rigorously test the theoretical model, we conducted a questionnaire survey (i.e., Study 1) and an experimental study (i.e., Study 2). Specifically, in Study 1, we gathered data from 326 employees through a multi-wave survey to examine the main effect. To enhance the internal validity of our results, Study 2 employed a scenario-based experiment involving 317 employees to test the whole model. Path analyses were conducted using Mplus 8.0 to test the hypotheses. Results generally supported that LPE is positively related to employees’ perceived competence, thus decreasing their emotional exhaustion and improving work effort; however, LPE also increases employee performance pressure, resulting in high levels of work effort but also emotional exhaustion. Moreover, employee promotion focus moderates the relationship between LPE and perceived competence. Promotion focus also strengthens the indirect effect of LPE on employee emotional exhaustion and work effort via perceived competence. This study contributes to a more comprehensive understanding of the impacts of LPE on employee work outcomes in several ways. First, previous studies mainly focus on LPE’s effects on employees’ work behavior or performance, paying less attention to work state. This study reveals the integrated impacts of LPE on employees’ work state (i.e., emotional exhaustion) and work behavior (i.e., work effort), thus expanding our understanding of LPE. Second, based on the conservation of resources theory and cognitive appraisal theory, this study examines the double-edged sword effects of LPE, complementing the existing research on LPE. This study also identifies the dual mechanisms of resource generation process (i.e., perceived competence) and resource loss process (i.e., performance pressure), and reveals the potential negative effect of LPE, contributing to the literature on self-fulfilling prophecy. Third, this study examines the moderating effect of employee regulatory focus, revealing the boundary condition of LPE’s effects and enriching the knowledge of the effects of LPE. These findings also shed light on how to effectively utilize LPE to exert its positive effects and avoid its negative effects in management practices. Leaders could convey positive performance expectation and confidence in employees’ work to satisfy their need for competence, improving employees’ work motivation and effort. Organizations should pay close attention to employees’ psychological state, especially during higher levels of performance pressure. Timely interventions could be provided to mitigate the negative effects of performance pressure, such as offering sufficient resources to avoid employees’ exhaustion.