Abstract: This Study aims at business direction known as Knowledge Management that has emerged over the last decades as a result of many intellectual, societal, and business forces. Some of its roots extend back for millennia, both in the West and the East, while others, particularly those associated with Cognitive and Information sciences, are quite recent. Knowledge Management is an increasingly important source of competitive advantage for organizations. Knowledge embedded in the organization`s business processes and the employee`s skills provides the firm with unique capabilities to deliver customers with a product or service. Much of the writing on Knowledge Management is related to the developed countries. This Study draws on a study of the state of Knowledge Management in Bahraini organizations. The arguments in this Study are strengthened by contributions in the Knowledge Management research literature, its research hypotheses are based upon familiar Knowledge Management problems (Davenport, 1998) and (Fahey, Prusak, 1998) and proposed solutions, tested by questionnaire survey and follow up interviews. In addition to answering questions about policies and perceptions, Bahraini firms rated themselves on such activities as Knowledge Management, knowledge sharing and ability to learn from experience. Bahraini financial firms are knowledge intensive, and the use of advanced technology may transform these organizations in the future. In addition, they are showing interest in Knowledge Management, as evidenced by the development of infrastructures, by concerns with the loss of knowledge, the deployment of mechanisms for the sharing and reuse of knowledge. This interest is also evidenced by an emphasis upon learning and a growing appreciation of the value of human resources, as the creators of knowledge and the source of solutions.