Researchers found that oxytocin caused participants to lie more to benefit their groups, and to do so more quickly and without expectation of reciprocal dishonesty from their group.
Oxytocin is a hormone the body naturally produces to stimulate bonding.
"Our results suggest people are willing to bend ethical rules to help the people close to us, like our team or family," said Dr Shaul Shalvi from the Ben-Gurion University.
"This raises an interesting, although perhaps more philosophical, question: Are all lies immoral" said Shalvi.
Shalvi's research focused on ethical decision-making and the justifications people use to do wrong and still feel moral.
"Together, these findings fit a functional perspective on morality revealing dishonesty to be plastic and rooted in evolved neurobiological circuitries, and align with work showing that oxytocin shifts the decision-maker's focus from self to group interests," Shalvi said.
"The results highlight the role of bonding and cooperation in shaping dishonesty, providing insight into when and why collaboration turns into corruption," said Shalvi.
Oxytocin is a peptide of nine amino acids produced in the brain's hypothalamus, functioning as both a hormone and neurotransmitter.
Research has shown that in addition to its bonding effect in couples and between mothers and babies, it also stimulates one's social approach.
In the experiment designed by Shalvi and fellow researcher Carsten K W De Dreu from the University of Amsterdam, 60 male participants received an intranasal dose of either oxytocin or placebo.
They were then split into teams of three and asked to predict the results of 10 coin tosses.
Participants were asked to toss the coin, see the outcome and report whether their prediction was correct.
They knew that for each correct prediction, they could lie and earn more money to split between their group members, who were engaging in the same task.
"The statistical probability of someone correctly guessing the results of nine or 10 coin tosses is about one per cent," said Shalvi.
"Yet, 53 per cent of those who were given oxytocin claimed to have correctly predicted that many coin tosses, which is extremely unlikely," said Shalvi.
Only 23 per cent of the participants who received the placebo reported the same results, reflecting a high likelihood that they were also lying, but to a lesser extent compared to those receiving oxytocin.
The research was published in the journal PNAS.