The general objective of the study was to determine the effect of performance appraisal onrnemployee motivation using a survey of Oromia International Bank. The study was guided byrnthe following specific objectives: The study adopted a descriptive research design. Thernresearch survey was conducted among 80 employees including department heads and fourrnbranches, a total of 80 employees responded resulting in a 100% response rate. Bothrnqualitative and quantitative research methods through semi-structured interviews and closernended questionnaires were analyzed to get an in-depth view about the problem. Performancernappraisal did not reflect objectively the employeesâ€™ performance and the employees were notrnsatisfied with performance appraisal system and motivation. Performance appraisal ratingrncan be considered as a technique that has a positive effect on work performance andrnemployee motivation. The employees may be motivated if the appraisal process is based onrnaccurate and current job descriptions. The performance appraisal identifies performancernproblems to improve employee productivity and motivation. Performance appraisal ratingrncan be considered as a technique that has a positive effect on work performance andrnemployee motivation. The employees may be motivated if the appraisal process is based onrnaccurate and current job descriptions. The performance appraisal identifies performancernproblems to improve employee productivity and motivation.rnKey words: Performance Appraisal, Motivation, Performance Management.