The present study examines the impact of COVID-19 anxiety on employees’ psychological resources and behaviors, drawing on the conservation of resources theory. We also investigate whether flexibility in work contexts has a meaningful effect on employees’ responses to the pandemic. A total of 284 working adults participated in an online survey consisting of self-reporting questionnaires that assessed levels of COVID-19 anxiety, vigor, innovative work behavior, and flexible working arrangements. The results showed that the level of vigor mediated the positive relationship between COVID-19 anxiety and innovative work behavior, and the perceived level of flexible working arrangements moderated this mediation effect positively. The findings highlight the importance of considering employees’ psychological resources and work arrangements in managing the negative impact of COVID-19-related anxiety. This study provides theoretical and practical implications for organizations to better understand the psychological processes that employees undergo during a crisis. Further research on diverse work settings and cultural backgrounds is needed to expand on the present findings.