In the present study, the direct effect of principal transformational leadership to school staff turnover and school performance was examined, in addition to its indirect effect through school staff job satisfaction. Survey data were obtained from elementary school staff and students, and school-aggregated student achievement test scores were obtained from school archives. Results showed that staff reports of principal behaviors could be described in terms of the three components of transformational leadership: inspiration or charisma, individualized consideration, and intellectual stimulation. Principal transformational leadership was not associated directly with either school staff turnover or school-aggregated student achievement progress. Rather, principal transformational leadership showed an indirect effect, through staff job satisfaction, on school staff turnover (negative) and on school-aggregated student achievement progress (positive). Finally, higher levels of school staff job satisfaction were associated with smaller achievement gaps between minority and non-minority students. This result was more evident among schools having higher levels of principal transformational leadership. Results are discussed in relation to the role of transformational leadership in school performance and in recruiting, training, and evaluating school principals. (Contains 4 figures, 6 tables and 2 notes.)