In the rapidly evolving landscape of the manufacturing industry, innovation and employee performance play pivotal roles in driving operational efficiency and long-term sustainability. This study explores the dynamic relationship between employee performance and innovation practices within the production sector, with a focused lens on manufacturing firms in Madanapalle, Andhra Pradesh. The research employed a structured questionnaire targeting 408 respondents, and statistical tools such as correlation, regression, and ANOVA were applied through SPSS software. The findings revealed a significant positive correlation between innovation practices and employee performance, indicating that companies embracing innovation tend to have more efficient, motivated, and adaptable employees. Furthermore, the study identified that technological competence had the most significant influence on product development speed. The results offer practical insights for manufacturing enterprises aiming to leverage human capital and innovation for competitive advantage and sustainability.