In this study the relationship between leaders of mental retardation (MR) institutions in a community and direct caregivers of people with mental retardation was measured. The study applied nonexperimental quantitative survey design. The study primarily investigated the dominant leadership style in the management of mental retardation. Because direct caregivers are guiding the day-to-day activities of people with mental retardation, the study also addressed the relationship between leadership and direct caregivers’ job satisfaction. The study investigated three agencies contracted by the State of Tennessee to handle daily activities of people with some kind of mental retardation. The multifactor leadership questionnaire short form and the Minnesota Job survey questionnaire were used to measure leadership styles and overall job satisfaction. The study concluded that transformational leadership was the dominant leadership style in MR organizations, while laissez-faire leadership style was the least. However, transactional leadership also exists in MR organizations. The study also found a significant difference in leadership styles among MR organization administrators exists and that transformational leadership had a positive correlation with caregiver’s job satisfaction.