Increasing evidence suggests that morality is linked to bodily self-consciousness (BSC), yet the factors shaping dishonest behaviour in competitive and ecologically valid interactions remain unclear. To address this, we developed a smartphone dice game app (“Roll & Tell”) in which participants engaged in 60 online matches against either Facebook friends or unknown opponents. Participants could misreport their dice outcomes to increase their chances of winning and obtain a monetary reward based on a global leaderboard. Results showed that participants deviated from the Nash equilibrium, as they did not consistently report the highest possible outcome. Instead, dishonest behaviour was flexibly modulated by contextual factors. Participants lied more when holding a greater scoring advantage, particularly when the game outcome had already been decided, and higher-ranking individuals showed a greater tendency to lie. Moreover, the effect of competitive advantage was amplified when playing against Facebook friends, suggesting that social closeness may increase competition. At the individual level, the relationship between BSC and dishonest behaviour was moderated by perceived sense of power. Higher Sense of Agency was associated with more honest behaviour only at low levels of perceived power, whereas this relationship disappeared at higher levels. No significant effects were observed for Sense of Ownership, reward sensitivity, or moral disengagement. Overall, dishonesty in online competitive environments appears to emerge from the interaction between strategic incentives, social context, and embodied self-processes. These findings highlight the value of ecologically valid paradigms for studying embodied morality in real-world interactions.