The purpose of this research was to determine the relation between principals' transactional and transformational leadership styles and the motivational needs of physical education teachers based on Douglas McGregor's X & Y theory. According to X theorical supposing human is interest to work and responsible and this is in her essence. This person is self control and self motivation. Whereas in according to Y theorical, human is comfort-seeking person and he can work only with duress(compulsion), directly control and fear of punishment. All of the physical education teachers in the West Azarbaijan province were the statistical society for this research (N=640) and 241 teachers were selected randomly as sample. After verifying the validity of the Bass & Avolio's Multifactor Leadership Questionnaire (MLQ) as well as Alan Chapman's motivational needs Questionnaire by the experts, their reliability were calculated in a pilot study (&alpha=0.940 and &alpha=0.906 respectively for leadership and motivation questionnaires). Data were analyzed by the Pearson correlation coefficient, independent t-test, ANOVA and repeated measure tests. The results showed positive significant correlation between transformational (r=0.538, sig=0.001) and transactional (r=0.445, sig=0.001) leadership styles with McGregor's theory Y assumptions (p> 0.01). There was no significant negative correlation between laissez- faire leadership style and theory Y assumptions (r=-0.080, sig=0.216). There was a significant difference between preferences of principals' leadership styles (p> 0.01). Thus, transformational style (2.345±0.852) was in first and the transactional (1.928±0.713) and laissez- faire (1.251±0.972) styles were in next preferences. From physical education teachers' perspective, the existing status in this province's schools was equivalent with theory X assumptions. It can be concluded that, transformational principals have more desire and belief to theory Y assumptions and these principals having Y-type attitude to employees, will have more ability to motivating them.