Background: Ethical leadership is one the main important issues in business and researchers follow its impacts in organization but not in temporary organizations with their own requirements. Based on importance of projects in Iran`s economy and poor history, in this research holy defense as project oriented environment and a historical experience and it`s capability to be used in today`s conditions is scrutinized.

Method: This is a qualitative research based on grounded theory method. Populations of study are some documents related to the second year of holy defense that coded in tree levels including open, axial and selective coding and then related categories. For examining the credibility of the theory we interview five of holy defense commanders and based on their opinions we correct some errors in the theory.

Results: The research show that ethical leadership was a key factor in young commander`s transaction with their followers which leads to high motive and performance. Leading role of commanders is the main category and meritorious structure and spiritual vision are the most important contextual conditions.  

Conclusion: Despite fundamental changes in the conditions of Iranian society from holy defense, the research show that ethical leadership can cause high motivation and productivity in today`s project oriented organizations. Meritorious structure is in the hands of managers but spiritual vision needs great effort from both managers of organization and also politicians and law makers to correct the business environment of Iranian society.