Traditional tourism development has adopted a top-down approach, and the role of government has primarily been decision making and regulation in regard to tourism development. There has been growing interest in residents’ participation in tourism destination development and management. The study aims provide empirical evidence by examining the relationship between participative leadership, empowerment, and tourism participation among residents living in the provinces near the borders in Korea. We examine the economic benefits derived from tourists as a moderator. A total of 758 questionnaires were used. This study performed descriptive analysis, factor analysis, and structural equation modeling (SEM). This study examined the effects of participative leadership and empowerment on three categories of residents’ participation in tourism in DMZ areas in South Korea. This present study tests the relationships between and evaluated the effects of participatory leadership and resident empowerment on three types of resident participation. Participative leadership positively influences empowerment and resident participation. In addition, a positive effect of psychological empowerment between participative leadership and participation as a mediator was found. Participative leadership affects motivational processes, and psychological empowerment leads to participation. The results found that residents perceive their participation as important, and there is no difference based on the additional income they derive from tourism. The study contributes to the enhancement of sustainable development and a deeper understanding of how residents act. Furthermore, the results can provide direction for the creation of participative approaches in tourism development.