The purpose of this study was to examine the relationship between compensation management and employee performance within the Development Bank of Ethiopia (DBE) at main branch and Addis Ababa District. The study was guided by the following specific objectives: (i) To identify the compensation packages available in Development Bank of Ethiopia main branch and Addis Ababa district (ii) To examine employees view of compensation package used by Development Bank of Ethiopia main branch and Addis Ababa district (iii) To assess employee opinions concerning effective compensation management and how this influences employee performance. The study used descriptive research design which incorporated both quantitative and qualitative approaches. The study surveyed 161 employees from both main branch and Addis Ababa District using structured questionnaire and interview. In order to select the respondents from the population, purposive sampling method was applied. Descriptive statistics were used to analyze data using SPSS and those outputs were presented as frequency distribution tables and histograms. The findings of the study shows that the Development Bank of Ethiopia offer financial and non-financial package to their employees. Nevertheless, the results showed that employees were not contented with the compensation packages available which were offered during this thesis execution period when it was compared with other financial industry and salary level was viewed to be too low and did not reflect cost of living in Addis Ababa city and its surroundings. This study recommended that the DBE management should improve the existing direct compensation and indirect compensation for employees to improve employees' performance.