Research shows that high-level military and sport leaders share a high-stress and high-stakes leader role due to similar experiences of demanding conditions mainly manifested in psychological burden. This raises research questions about leaders’ psychological strategies to maintain their mental health and performance under demanding conditions. Thus, the current study investigated how experienced demanding conditions were related to self-rated leader performance level and mental health indicators among high-level military and sport leaders and whether the application of psychological skills by these leaders moderated these relationships. A composite questionnaire was used to collect data longitudinally, once a week for four consecutive weeks. Fifty-two Swedish high-ranking military officers and executives in elite team sport organizations completed the questionnaire. Multilevel analysis revealed no effect of demanding conditions on leader performance, but they harmed leader vitality and were associated with higher stress symptoms. Moreover, psychological skills did not moderate the relationship between demanding conditions and leader performance. However, motivational and instructional self-talk negatively moderated the relationship between demanding conditions and vitality. In contrast, emotional regulation, comprised of mindfulness and cognitive reappraisal, positively moderated vitality. Emphasizing the nuanced application of psychological skills is crucial while avoiding one-sided beliefs about their positive effects. Interventions are suggested to focus on vitality and related psychological skills to ensure leaders feel good while performing under demanding conditions. More cross-contextual leadership research, suggestively applied research, is needed to better understand the links between high-level military and sport leaders’ psychological skills, leader performance, and mental health under demanding conditions.