Abstract: Public sector organizations face persistent pressure to innovate while navigating bureaucratic constraints that often inhibit creativity and experimentation. This article examines the interplay between public service motivation (PSM), organizational red tape, and job satisfaction in shaping innovation outcomes within government and nonprofit contexts. Drawing on organizational behavior literature, institutional theory, and evidence from diverse public agencies, we demonstrate that high PSM can buffer against the demotivating effects of red tape while simultaneously catalyzing innovative behaviors when coupled with adequate job satisfaction. Conversely, excessive procedural burden systematically erodes both satisfaction and innovation capacity, even among highly mission-driven employees. We present evidence-based organizational responses spanning transparent governance reforms, procedural rationalization, participatory innovation structures, and capability-building initiatives. The synthesis reveals that sustainable public sector innovation requires intentional management of the psychological contract, distributed leadership models, and continuous learning systems that honor both accountability imperatives and creative problem-solving.