Progress in Machines and Systems Mueen Uddin 7 1 2018 http://www.dline.info/pms/fulltext/v7n1/pmsv7n1_2.pdf Knowledge management (KM) is the process of creating, utilizing, sharing, storing and re-use of knowledge for making better organizational decisions due to the availability of relevant knowledge. The proper management of knowledge and proper utilization of human capital helps in creating innovation for running any successful business. Well-structured and well-managed knowledge and knowledge-based human capital lead to more constructive innovation. Knowledge management, HRM practices, and organizational innovation was measured through instrument designed by Chen& Huang (2009). Primary data was collected through questionnaire from 100 employees of different public banks and 100 employees of different private banks. Co-relation was applied to find the effect of knowledge management on HRM practices and organizational innovation and also helps to find out that how much knowledge management enhances HRM practices and helps in bringing organizational innovation in public and private banks in Pakistan. T-test was used to measure the impact of knowledge management in public and private banks. This test requires two variables: one categorical, which was “organization” here; and other continuous variable, which was “Knowledge Management” here. Analysis showed that there was not a significant difference of knowledge management in public and private organization. The correlation was conducted to assess the effect of knowledge management on HRM practices. This test requires two continuous variables: one was “knowledge management” here, and the other was “HRM practices” here. The results yielded by the analysis showed that a positive relation between knowledge management and HRM practices that means knowledge management enhances HRM practices correlation was also used to access the effect of knowledge management on organizational innovation in public and private banks. This test requires two continuous variables: one was “knowledge management” here, and the other was “organizational innovation” here. The result of this test showed that there is a positive relation between knowledge management and organizational innovation that means knowledge management helps in bringing organizational innovation.