Hospital employees, who work in an environment with zero tolerance to error, face several stressors that may result in psychological, physiological and behavioural strains, and subsequently, in suboptimal performance. The study is a multilevel investigation of the strain-reducing effects of the social environment on externally-rated unit-level performance based on primary data from 1,137 employees in 136 units and from forty-four external raters in a hospital in Malta. The term “social environment” refers to the prediction of the moderator variables, namely social support and decision latitude/control by transformational leadership and team climate. This study identifies a number of moderating effects that social support and decision latitude/control had on specific stressor-to-strain relationships. The results also show significant mediated stressor-to-strain-to-performance relationships. This research strives to make a significant contribution to the occupational stress and performance literature with a focus on hospital practice.