The purpose of this quantitative field study is to examine the relationship between perceived leader narcissism and employee proactive behavior, incorporating leader–member exchange (LMX) quality and leader identification as moderators. Within the social identity theory framework, implicit leadership and social categorization theories are used as the underpinning basis for our hypothesized three-way interaction moderation model. The research sample consisted of 90 groups (including 326 employees and 90 leaders) from different companies in China. Results indicate that there is a three-way interaction effect between perceived leader narcissism, LMX quality, and leader identification, which negatively influences employee proactive behavior. Specifically, when LMX quality and leader identification are both at a high level, the negative relationship between perceived leader narcissism and employee proactive behavior is most salient. Theoretical and practical implications are discussed.