The major objectives of this study were: (a) to examine the gap between customers'rnexpectations and their actual perceptions of service quality performance of commercialrnbanks operating in Ambo town, (b) to examine and compare the service quality gaprnscores across these commercial banks, and (c) to identifY the service quality dimensionrnM that customers of each bank favor mos/. A questionnaire used for this investigation isrnlimited to a sample of 325 re5pondents residing in Ambo town. The sampling procedurernused was non-probability convenient sampling The measurements used were based onrnwidely accepted SERVQUAL model. A descriptive statistics analysis (mean and paired ttest)rnwas used 10 see the gap between customers ' perceptions and their actualrnexpectations of their respective banks. The study shows that all banks in Ambo have notrnmet the service expectations of the customers because; there is a significant gap betweenrnthe perceptions and expectations of banks' customers. Among the five dimensions ofrnservice quality, the highest negative gap score belongs to re5jJonsiveness, thoughrncustomers rated re5jJonsiveness as the most importanl service allribute of all the fivernservice quality dimensions. Further, the study also found that the lowest negative gaprnscore is examined in Awash international bank which indicates that the service qualityrnpelformance of this bank is beller Ihan Ihal of other two banks, CBE and CBO Hence,rncustomers of AlB were relatively sati~fied with the overall service quality performance ofrntheir bank. Given today 's competitive banking marketing environment in the country, thernresearcher believes that it is appropriate for the management of the all commercialrnbanks to seriously examine their corporate quality programs and customer servicernsystem. In addition, they must also consider that their pelformance measures now have tornplace a value on beller responsiveness to customer needs. These measures and changesrncan be expensive in terms of employee time and effort, but the management of these banksrnneeds to find ways to overcome these hurdles, otherwise the increasing competition Fomrnnon-bank financial institution may shrink their market shares. Therefore, all commercialrnbanks need to belfer understand their customers and continuously measure and evaluaterntheir service quality performance in order to improve their service quality based onrncustomers' perceptions.