SUMMARY
Commercial bank of Ethiopia seeks to obtain maximum level of performance from bank employees. Compensation system is a key to enhances employees’ motivation and performances. Employees motivation also a crucial in human capital and resource management. Therefore, this study was aiming to investigate the role of compensation system on employee's motivation in the Commercial bank of Ethiopia. For the study total 55 sample was determined. The research was applied primary and secondary data. Primary data was collected through questionaries and interviews. Descriptive and inferential data analysis method was conducted. The result presented that out of 100% employees, 83.64% employees received compensation in the study branch. Hence, compensation system and practice positively and significantly associated with employee’s motivation and good performance. Commercial bank of Ethiopia under research should focus on enhancing compensation systems, practices, and policies implemented in the bank.