The purpose of this study was to develop a grounded theory of the process of inspirational coach-leadership in sport. A Straussian grounded theory methodology was used. Semi-structured interviews and focus groups were conducted with athletes (n = 22) and coaches (n = 15). Data were analysed through a process of open and axial coding, and theoretical integration. Through the process of analysis, data were broken down into smaller units (concepts), relationships between concepts were identified, and a substantive grounded theory was developed. The grounded theory of inspirational coach-leadership was built around the core category of ‘athlete(s) inspired through changed awareness of their capabilities.’ The core category was underpinned by three categories: (a) Establishment of mutual trust and respect with athletes, whereby coaches need to establish trust with athletes in order to inspire athletes; (b) conditions under which inspiration has the potential to occur, which highlighted that athletes are inspired in situations where they are vulnerable or ignorant regarding their potential; and (c) coach acts to change athlete’s awareness of their capabilities, which denotes the specific behaviours coaches should display to inspire athletes in such conditions. The theory also highlights that a range of contextual factors relating to the coach, athletes, and performance-environment interact to impact upon the process. The theory predicts that consistency between coach behaviour and the conditions in which inspiration can occur will lead to athlete-inspiration, but only if the coach has established a foundation of trust and respect with the athlete.