PurposeVillage health volunteers are community health volunteers in Thailand that have helped the government deliver public health services for many years, particularly during the coronavirus disease 2019 (COVID-19) pandemic. Though labeled as “volunteers,” the village health volunteers are recruited, trained and supervised in a manner similar to how a government agency recruits, trains and supervises its street-level bureaucrats (SLBs). This study examines the two factors that affect how these street-level quasi-bureaucrats use their professional discretion: transformational leadership and public service motivation (PSM). Transformational leadership means a leadership style that develops, shares and sustains a vision to elevate SLBs to higher levels of performance, while PSM is defined as an SLB’s predisposition to make a difference by working in the public sector with a sense of calling. This study attempts to analyze the mediating role of psychological empowerment in the relationship between transformational leadership, PSM and professional discretion.Design/methodology/approachThe paper uses a three-wave survey-based quantitative method to avoid common method biases. This method provides evidence gathered from 105 subdistrict health promotion hospitals and 798 village health volunteers (VHVs) in five provinces in Thailand.FindingsPSM and transformational leadership influence the village health volunteers' use of professional discretion indirectly through the psychological empowerment mechanisms that make them feel positive toward their village health volunteer role and responsibility. The authors' findings suggest that the hospital directors' transformational leadership induces the village health volunteers' use of professional discretion by making them feel competent to do their work and feel fulfilled and valuable about their work. Similarly, the village health volunteers' PSM leads them to use professional discretion by making them feel fulfilled and valuable and by convincing them of the social and community impact of their work.Research limitations/implicationsWhile existing research focuses on VHVs' role in alleviating capacity constraints on the health care system, this study revealed an equally important role played by hospital directors. These directors' transformational leadership was instrumental in enhancing VHVs' psychological empowerment – particularly their perceptions of the meaning of their work and their competence – that ultimately enabled them to use professional discretion in their work. This study also highlighted the importance of VHVs' PSM, which leads to their use of professional discretion via the meaning and impact dimensions of psychological empowerment. Based on this study, PSM should also be incorporated into the community health volunteers' recruitment criteria. Also, public health agencies should consider including transformational leadership in the hospital directors' training programs and their promotion criteria.Practical implicationsAs VHVs' high-PSM level was found to enhance their professional discretion, the process of recruiting ordinary citizens to serve as community health volunteers should incorporate assessment of the candidates' PSM. Also, the Ministry of Public Health should design and assign tasks that citizen volunteers, particularly VHVs, consider meaningful and at which they feel competent.Social implicationsAside from technical training, directors of the subdistrict health promotion hospitals should regularly receive soft skill training (i.e. leadership training) and transformational leadership characteristics should be included in the government criteria for promotion.Originality/valueWhile past research has examined the impact of other leadership styles on psychological empowerment, this study took a further step by examining the mediating effects of psychological empowerment on the relationship between transformational leadership and professional discretion among VHVs. The authors analyzed the mechanism linking PSM to the VHVs' professional discretion. In addition, by examining the relative importance of different dimensions of psychological empowerment, this study offers a nuanced understanding of the psychological processes by which transformational leadership and PSM shape the SLBs' use of professional discretion in their work.