Using job demands–resources (JD-R) theory, the present study integrates the challenge stressor-hindrance stressor framework and leadership theory to investigate the relationship between daily transformational leadership behavior and employee work engagement. We hypothesized that daily transformational leadership behavior (a) sustains employee work engagement on days characterized by high challenge job demands, and (b) protects work engagement on days characterized by high hindrance job demands. Teachers filled out a short online questionnaire at the end of each workday during a 2-week period (N = 271 × 5.68 days = 1539). Results of latent moderated structural equation modeling showed that teachers’ daily challenge demands (workload and cognitive demands) had a positive relationship with work engagement on the days transformational leadership was high (vs. low). In addition, teachers’ daily hindrance demands (role-conflict, but not family to work conflict) had a negative relationship with work engagement on the days transformational leadership was low (vs. high). These findings show that the function of transformational leadership behavior changes from day to day, and depends on the type of job demand. We discuss the practical and theoretical implications of these findings.