Most of the water supply systems are managed by water supply users committee. The large numbers of water supply system are not functioning. Dhankuta 7, 8, 9 water supply system was constructed in 1993 and then after it was being operated by Water Supply Users Committee. The water supply system was running 23 years. The performance of the water supply system is under questions. The overall objective of the study was to assess the institutional Performance of Dhankuta 7,8,9 Water Supply System with implementation status of water safety plan. The stratified random sampling method was applied for sampling based on cocharent sampling method. The questionnaire survey focus group discussion, key informant interview, field observation were done to gather primary data as well as published report, journals, research paper, article, progress report were reviewed for secondary data. The institutional performance was analyzed through analysis of functionality index, institutional setup, staff productivity index, capacity of WSUC member and staff separately and the implementation status of water safety plan. Regarding to institutional performance the result shows that the functionality index is 70%, staff productivity index is 36.53, the individual capacity of WSUC member obtain 8 in institutional management, 7 in both technical knowledge and financial management out of 10. The implementation status of water safety plan shows that it is functioning partially and the consumers are conscious about water quality and more than 50% prefer boiling before drinking water. It should be enhanced the capacity of WSUC members and staff.