Employees' performance is one of the major issues in an organization. The purpose of this study was to explore the influence of performance appraisal system on employees' performance in the case of Addis Ababa Abattoirs Enterprise. The study was aimed to: identify whether setting performance standards in an organization will lead to better employees' performance or not; evaluate how communicating performance expectation to employee has an effect on employees' performance; determine how measuring actual performance of employees based on Predetermined standards has an effect on employees' performance; realize how comparing actual performance with standards affect employees' performance; find out the effect of discussion on appraisal result and giving feedback on the employees' performance, and identify the relationship between indicating corrective actions and employees' performance. The method of the study was quantitative and data were collected by the use of questionnaires from 277 employees from the target enterprise. Data from the research was analyzed by using Statistical Package for the social sciences. To analyze the data, descriptive (frequency, percentage and mean) and also inferential statistic (Pearson's correlation coefficient and regression) test were run. The association between employees' performance and each performance appraisal system dimensions are significant, which indicates that there is a moderate positive relationship between performance appraisal system and employees' performance. Regression analysis model indicates performance appraisal system has a significant positive effect on employees' performance. The study recommended that the management should strive to make their employees aware of the role of the performance appraisal system. The results of the appraisal shall be communicated to the employees, and then both administrative and developmental corrective actions shall be applied to improve performance