Abstract-This study is conducted in order to examine the adoption of internal marketing activities in small and medium enterprises in Malaysia. On top of that, this particular study is designed in order to investigate the conception of internal marketing by business manager's task adding to the limited empirical evidence regarding internal marketing especially in a developing country like Malaysia. Base on previous literature and few in depth interviews with the SME's managers, a set of questionnaires related to internal marketing practices in SME's Industry has been designed. Few dimensions have been used in this study such as group interaction, wage flexibility, collegial interaction, job flexibility, external environment and formal interaction. Basically the result of the study will give some input to those governmental agencies such as MECD to understand the level of adoption of internal marketing activities among the SMEs in Malaysia particularly. With this, it will provide some direction to the agencies in designing and developing appropriate training related to managerial approach especially in term of the soft part of human resource practices that would lead to competitive advantage to the organization.