Drawing from social/political influence, leader–member exchange (LMX), and social comparison theories, the present two‐study investigation examines three levels of LMX differentiation (i.e., individual‐level, meso‐level, and group‐level LMX differentiation) and further tests a model of the joint effects of political skill and LMX differentiation on LMX, relative LMX, and employee work outcomes. In Study 1, we used data from 231 employees and found support for the interactive effect of political skill and individual perceptions of LMX differentiation on LMX quality. We also found partial support for the moderating role of individual‐level LMX differentiation on the indirect effects of political skill on self‐rated task performance and job satisfaction via LMX. In Study 2, we used data from 185 supervisor–subordinate dyads and examined both meso‐level and group‐level LMX differentiation via a multilevel moderated mediation model. Results supported the moderating role of group‐level LMX differentiation and group mean LMX on the indirect effects of political skill on supervisor‐rated task performance and contextual performance/citizenship behavior as well as job satisfaction via relative LMX. Overall, the results suggest that politically skilled employees reap the benefits of LMX differentiation, as they enjoy higher absolute LMX and relative (i.e., to their peers) LMX quality. Copyright © 2016 John Wiley & Sons, Ltd.