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The ability to effectively engage in cross-cultural interactions is imperative for leaders in our increasingly globalized world. Those who possess certain key psychological resources are more likely to engage in cross-cultural interactions successfully. Psychological resources include cross-cultural hope, efficacy, resilience, and optimism, which together comprise cross-cultural psychological capital (CC PsyCap). Previous research has indicated that CC PsyCap predicts cultural competence, yet the pathways underlying this relationship remain unexplored. We examined the relationships among CC PsyCap, engagement in cross-cultural interactions, stress during cross-cultural interactions, and cultural competence. The hypothesized relationships were tested using a sample of 135 undergraduate students (76% female) participating in study abroad programs. Participants completed measures of cultural competence, CC PsyCap, engagement, and stress approximately one month into their study abroad. Structural equation modeling analyses indicate that CC PsyCap and stress influence cultural competence directly and indirectly through engagement level during cross-cultural interactions. Furthermore, the results suggest that CC PsyCap indirectly influences engagement through stress during cross-cultural interactions. We discuss the implications of these results for people preparing to enter cross-cultural environments.