In today's competitive world, knowledge management has emerged as one of the most important asset to enhance organizational performance. The main objective of this study was to examine the effect of knowledge management practice on organizational performance of private banks in Bahir Dar Town. To achieve the research objective, the researcher employed explanatory and cross-sectional research design and adopts a quantitative research approach. From the total of 564 employees from five private bank in Bahir Dar city administration, the present researcher was selected 234 sample employees by using stratified random sampling technique which represented the total population of the study. Primary data was collected via a closed-ended questionnaire and analyzed by using SPSS version 26 after coding and cleaning to eliminate any inadequacies. Data were analyzed using frequency descriptions, correlation, and regression analysis. Most importantly, a multiple regression model was applied to determine the cause and effect relationship between the dependent and independent variables. The result of this study reveals that organizational performance of private banks in Bahir Dar Town is significantly influenced by knowledge acquisition, knowledge application, knowledge sharing and knowledge storage. From the regression analysis model the adjusted R square value indicated that the independent variables (knowledge acquisition, knowledge application, knowledge sharing and knowledge storage) can have predict 60.2% of the dependent variables (organizational performance). Moreover, Knowledge application and knowledge acquisition generates the highest effect on organizational performance of private banks in Bahir Dar Town. Thus, this research recommended that private banks in Bahir Dar Town to give more attention for knowledge management practice to improve organizational performance and provide an input for policy design and to lead the market as well as to survive the current competitive environment.