The objective of this study is to investigate the effect of trade liberalization on employment performance of textile and clothing industry in Tanzania. The basic issues of concern are that the implementation of trade liberalization has impact on employment of textile industry in Tanzania; and a reduction in the effective rate of protection and trade reforms are associated with a reduction in employment and wages. In achieving this objective as well as addressing these issues, econometric models of employment and wages are estimated using co integration method of analysis. From the findings this study recommends that the process of trade reforms should be more gradual and needs to be strengthened. Appropriate institutional framework and good governance system are equally important. There is the need for policies to attract more investors to manufacturing sector, stimulating and promoting labour market programmes, adopting and maintaining selective protection within the WTO Agreements. There is also the need to update industrial and trade policies to complement the multinational policy.