Ethical behavior is a very important fact for the success of any organization because it influences its relations with numerous stakeholders for making certain the success of a business. This paper attempts to examine the impact of ethical behavior on employees’ performance in Nepalese commercial banks. Descriptive research design has used to identify characteristics, frequencies, trends and categories of the impact of ethical behavior on employee performance and causal comparative research design has also used to ascertain and understand the directions, magnitude and forms of the observed relationship between ethical behavior and employees’ performance. Self-administered structured questionnaires were distributed to a total of 810 respondents (30 respondents of each 27 commercial banks) but only 575 usable responses are collected and has used to analyze the data. Employees’ performance is dependent variable and respect, teamwork, reward and punishment, racial discrimination, leadership style, discipline and corruption are independent variables. It is found that respect, teamwork, reward and punishment, leadership style and discipline have a positive impact on the performance of employees, and however, racial discrimination and corruption hurt employee’s performance in Nepalese commercial banks.