Employees are important assets to any organisation. So, it becomes important for the organisation to understand and motivate the employees. In spite of all the motivations and support, the employee may not perform up to the expectations of the organisations. At such times it becomes more important for the organisations to understand the reasons of failure on the part of the employee. Such failure can be measured by using the Performance Appraisal System.When performance appraisal is conducted in an organization, an individual experiences various impacts like, behavioural and emotional. One such major contribution is of Psychological impact of Performance Appraisal. Psychological impact of performance appraisal often creates/develops many emotions in oneself, such as, fear, pride, anxiety, joy, etc.  This psychological impact helps in creating conditioning on human (employees’) mind which sets one’s perception regarding performance appraisal and the kind of work one does.In order to study the various psychological impacts one come across during the process of performance appraisal, the researcher conducted a survey with 40 sample size by preparing a self-made questionnaire in educational field in the region of South Gujarat, City: Surat.The result shows that there is direct relationship between performance appraisal and psychological impact on an individual .i.e.; negative appraisal generates negative psychological impact, while positive appraisal gives rise to positive psychological influences.