Tensions and paradoxes are inherent in team dynamics, particularly in diverse, collaborative environments. While prior research highlights the benefits of a paradox mindset for fostering creativity and managing task-related tensions, its role in navigating interpersonal conflict remains largely underexplored. Interpersonal conflict presents a distinct challenge, often prompting team members to perceive others’ behaviors as obstructive, leading to defensiveness, withdrawal, and reduced participation. These reactions can erode confidence in the team’s collective capabilities and ultimately undermine performance. Integrating research on team conflict and organizational paradox, we theorize that paradox-minded individuals—those who embrace tensions and view them as opportunities for learning—enable teams to engage conflict constructively. These members acknowledge how their perspectives may contradict those of others and respond with curiosity and equanimity to uncover interdependencies, rather than avoid conflict. As a result, this mindset enhances conflict self-efficacy and reinforces team potency—the shared belief in the team’s ability to perform effectively. These mechanisms, in turn, increase members’ motivation to stay engaged, navigate tensions productively, and sustain high performance. Findings from a longitudinal study of 60 diverse, self-managed MBA teams (N = 301) and a pre-registered experiment (N = 512) support our theory: teams with paradox-minded members demonstrated higher team potency and performance. The benefits of paradox mindset were especially pronounced when teams experienced conflict, particularly relationship conflict. Our research advances understanding of how teams can maintain potency and performance amid enduring interpersonal tensions.