Background: Objective structured practical examination (OSPE) is one of the methods to minimize the variations in subjectivity, thus enhancing objectivity. Currently, OSPE is used for formative assessment during internal examinations in many institutes as universities have still not incorporated it. This study is designed concerning the perception of teachers and Phase III part 1MBBS students regarding OSPE and traditional Practical examination Methods for Phase III part 1MBBS students. Methods: An analytical cross-sectional study as a part of educational research was done at a government medical institute in India to explore the perception of students and teachers of OSPE. Students were assessed on the traditional system and also on OSPE. The perception of the students and teachers was taken on a Likert scale-based questionnaire. The scores were also compared between the two groups. Results: In the present study a total of 92 students have participated in the OSPE and a total of 88 students have participated in the Traditional practical examination. A greater number (18) of students could gain marks between 75%-99% by the OSPE method in comparison to the Traditional Practical examination(6). Almost half of the students (50.9%) agreed to the statement that OPSE is a fair mean of examination in comparison to traditional practical examination and are satisfied with the difficulty level (59.6%) and believe that it is an effective and valid tool to assess knowledge (54.4%). Maximum faculty (66.7%) agreed and 33.3% of faculty strongly agreed that OSPE is an effective tool for assessment, is a well-organized system and covers most of the topics from the syllabus. Conclusion: This study showed there was a significant difference in scores obtained in OSPE, in comparison with conventional practical examination. Hence, OSPE is a more effective and valid assessment tool as inter-examiner variation and bias will be eliminated.