This multilevel longitudinal study investigates a newly identified climate construct, psychosocial safety climate (PSC), as a precursor to job characteristics (e.g., emotional demands), and psychological outcomes (i.e., emotional exhaustion and depression). We argued that PSC, as an organizational climate construct, has cross-level effects on individually perceived job design and psychological outcomes. We hypothesized a mediation process between PSC and emotional exhaustion particularly through emotional demands. In sequence, we predicted that emotional exhaustion would predict depression. At Time 1, data were collected from employees in 36 Malaysian private sector organizations (80% responses rate), n = 253 (56%), and at Time 2 from 27 organizations (60%) and n = 117 (46%). Using hierarchical linear modeling (HLM), we found that there were cross-level effects of PSC Time 1 on emotional demands Time 2 and emotional exhaustion Time 2, but not on depression Time 2, across a 3-month time lag. We found evidence for a lagged mediated effect; emotional demands mediated the relationship between PSC and emotional exhaustion. Emotional exhaustion did not predict depression. Finally, our results suggest that PSC is an important organizational climate construct, and acts to reduce employee psychological problems in the workplace, via working conditions.