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Rural environmental governance in developing countries is often challenged by problems of insufficient investments, lack of incentives of stakeholders, and unsustainable practices. Whilst the dysfunction of rural community is regarded as one of the major reasons and has attracted much attention, the role of community leadership and its contributions to rural environmental governance under the dynamic changing context has been rarely explored. Drawing upon case studies of villages in Shanghai, China, this study posits that rural community leadership could be categorized into three dimensions: leading and demonstrating, mobilization and organization, and reputation and credibility. Results show that all three dimensions contribute positively to rural environmental governance, while mobilizing and organizing contributes more significantly in the short term, and reputation and credibility promotes rural environmental governance more effectively in the long term. Community leadership also presents significant moderating effects on the function of stakeholders and the implementation of top‐down policies and village rules and norms. Therefore, cultivating community leadership should be prioritized in the process of improving rural environmental governance. [ABSTRACT FROM AUTHOR]