Leader moral anger expression, a behavior that inherently embodies a dual focus on fundamental moral values and social well-being of broad groups, has emerged as a common practice aiming to maintain ethical order in the workplace. Despite its prevalence in practice, academic research has yet to fully elucidate whether, how, and when leader moral anger expression influences observer moral behavior and well-being. To address these issues, we draw on appraisal theory of emotion to identify observer moral identity as a critical boundary condition and reveal differentiated emotional processes (i.e., elevation and anxiety). Specifically, when observers have a higher level of moral identity, leader moral anger expression can promote observer elevation, thereby further promoting observer’s helping behavior and mitigating observer insomnia. However, it can also lead to observer anxiety for those with a lower level of moral identity, which in turn reduces observer helping behavior and increases insomnia. Through a pre-registered two-wave multi-source field study and a pre-registered scenario-based experiment, our hypotheses were largely supported. Our research reveals the double-sword effects of leader moral anger expression and extends theoretical and practical understanding of moral anger expression.