The study objective of this study was to determine the effect of interest rate capping on the relationship between strategy implementation and performance of commercial banks in Kenya. The theoretical foundation for this study was cognitive theory, evolution theory and Resource based view theory. This investigation utilized a descriptive design and cross sectional survey. The target population for the study constituted of the remaining forty (40) commercial banks and one (1) licensed mortgage financial institution with branches in Mombasa County, Kenya. Due to the size of the population for the study, a census survey approach was adopted for study sample size. Therefore, the sample for the study was all the management level employees in all the commercial banks in Mombasa. Data collection tool was structured questionnaire. To summarize the data, descriptive statistics were used. The study adopted Baron and Kenny (1986) threestep regression model to establish the effect of interest rate capping on the relationship between strategy implementation and performance of commercial banks. iThe study found that Strategy implementation is statistically significant to performanceiof commercialibanks iniMombasa County.iThe studyifurther revealed that Strategy implementation had significant positive relationshipiwith performanceiof commercialibanks iniMombasa County. Theistudy alsoifound thatiupon introductioniof interest rate capping, strategy implementation is mediated by interest rate capping significantly, influencing performance oficommercial banksiin MombasaiCounty negatively. Theistudy concludes that increasing the mediating effect of interest rate capping on strategy implementation will lead to decrease in performance oficommercial banksiin MombasaiCounty.iThe study recommendsimanagement of the commercialibanksito conduct in-depth research on the strategies that can be implemented in their organizations to increase its performance. The study also recommends banks to establish organizational culture that will boost its performance; commercialibanks iniKenya shouldiadopt aniadjustable andidynamic organizationaliculture soias toiensure successfulistrategy implementation.iTheibanks can also embrace Reward and Recognition system that will motivate employees therefore increasing their performance which will in turn increase the performance of the bank. The government to review the policies on interest rate capping to ensure they are favorable to both the bank and its customers; this will increase performance of the bank and therefore increase general performance of the country’s economy.

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