Organizational culture and knowledge management become the prominent dimensions in developing the health service innovation into achieve the high performance of the health service institution in the era of decentralization and competitiveness for local government Organizational culture has benefits to improve the condition of performance and innovation, and also knowledge management can help to make the organization stability and organization performance. Surprisingly, there is little research conducted to measure the organizational culture and knowledge management by using the health service innovation as a moderating variable toward the performance of health service institution. The primary purpose of this article is to examine the effect of organizational culture and knowledge management on the health service innovation and performance of the health service institution at Sinjai Regency, South Sulawesi Province. This research is a quantitative approach and the type of research was surveyed exploratory. The population of research was 420 those who work at the Local Hospital and Central Health Service in Sinjai Regency. The research sample was 201 participants that are gained through Krejcie table in the margin of error 95%. The data were gathered through questionnaires which used Likert scale. In analyzing the data, we used structural equation modelling through AMOS software version 24. The research findings showed that five proposed hypotheses were supported respectively. Therefore, local governments and the health service institution should be strengthening organizational culture and knowledge management in improving health service innovation and performance in local government.