This paper presents a state-of-the-art examination of the literature addressing humor in leadership. A theoretical rationale is developed for the importance of humor as functional communication, especially as it relates to leadership. Research from several disciplines relevant to the use of humor in leadership is organized and synthesized. Practical applications of humor are presented on what may help leaders improve their communication skills not only by learning to use humor personally, but also by learning to use humor within their organizations. Based upon the literature review, the paper concludes that humor is a useful, but delicate, communication tool for leaders. Contains over 200 references. (Author/EH)