This article builds on the argument that research on the link between HRM and performance benefits from investigating how HR practices are envisioned by managers (in terms of underlying philosophies), and how they are perceived by employees (in terms of psychological climates). Our study focuses on the effects of a strengths-based HR philosophy assuming that employee performance can be maximized through leveraging individual strengths. This philosophy relates to a strengths-based psychological climate, that is, employee perceptions of the opportunities they get to identify, develop, and use their strengths. We hypothesized that a strengths-based psychological climate positively influences employees’ positive affect, which in turn enhances their in-role and extra-role performance. In our study, 442 respondents working in 39 departments of eight Dutch and Belgian organizations gave ratings on the strength-based psychological climate of their organization, and indicated their level of work-related positive affect, in-role performance, and extra-role performance. Results of multilevel hierarchical regression analyses supported our hypotheses by indicating that strengths-based psychological climate was positively linked to in-role and extra-role performance, and that this link was mediated by positive affect.