Introduction: Employees motivation has been suggested as the main determinant and is a critical challenge for many countries’ health system. The objectives of the health system are not being attained in most countries because of serious human resource policy crises, particularly of poor motivation. The main reason for employees demotivation is attributed to managers do not now the right way to conduct an appraisal and no feedback is given to the employees Objective; The objective of the study was to assess levels of employees motivation and associated factors in the context of performance appraisal at public hospitals of North Gonder zone, Amhara, Northern Ethiopia, 2022. Methods; Embedded study design, institution based cross-sectional quantitative study design supplemented with phenomenological qualitative study design was conducted from May 18-June 18, 2022. Structured pretested questionnaire and interview guide was used to collect data. Epidata version 4.6 and spss version 23 were used for data entry and analysis respectively. Multiple linear regressions were used for identifying determinants of employees’ motivation. The cut-off point for the regression analysis to determine significance was set at (P<0.05) Results: A total of 398 employees participated in the study with response rate of 93.5% of which 163(40.1 %) of participants were aged 25-35 years and 234 (58.8%) of respondents were male. The mean motivation scores (as the percentage of maximum scale scores) were 28.3% for the overall motivation of employees. Performance standards (β=.178), continuous open communication (β=.253), compare performance against standards (β=.352) and providing feedback (β=.101) were found to be positive and statistically significant (p<0.05). Bias and skill gaps had been identified in the in-depth interview as limitation of performance appraisal. Conclusion and recommendation; the overall employees motivation in the public hospitals was very low. Factors such as performance standards, continuous open communication, compare performance against standards and providing feedback were significantly associated factors of employees motivation. It is better to revise the system and give capacity building training to on performance appraisal to appraisers to improve their skill and knowledge. Keywords; Employees motivation, performance appraisal, North Gonder zone, Ethiopia