Performance management system is the most reliable method of measuring performance since it focuses on results and is also concerned with improved employee performance and organizational results. Effective performance can be ensured only when organizations are able to execute each key Component of the performance management process well. Organizations not only set goals and plan work routinely, they measure progress toward those goals and give feedback to employees, develop the skills needed to reach them and recognize the behavior and results through rewarding. The main objective of this study was to assess the Practice and Challenges of performance management in Ethiopian federal police management development sector. To address this objective descriptive survey research designs has been employed by using both quantitative and qualitative research approaches. The total number of population was 1984 and for this study stratified simple random sampling techniques was used by taking 333 employees to fill the questionnaires. The total numbers of respondents are selected through systematic simple random sampling technique for quantitative and 5 participants were selected by using purposive sampling technique for qualitative data. The data gathered from the questionnaires were compiled by using SPSS software and analyzed using descriptive statistics frequency and percentage. On the other hand data gathered from interview were analyzed in narration form by relating it with the themes of the objectives. The result of the analysis was presented using tables graph and pie charts. The major findings from the study proved that there was no regular feedback, there were no recognition and reward for best performers, lack of knowledge and skill to implement, poor integration, feedback and performance evaluation result not communicated, lack of line management commitment, and these were the major challenges of PMS in the sector. Having this in mind, the researcher recommended that offering regular feedback, developing and implementing an Integrated PMS , providing recognition and reward for the best performers , Providing continuous training and coaching, create a precise and consolidated, commonly agreed institution wide and viable performance evaluation criteria. Line managers should need to show a real sense of ownership during implementation of PMS. Therefore, a lot has to be made in making performance management practice more useful for the sector. In order to fill the identified gaps, there should be an effective implementation of performance management system in the sector