The alignment between information systems (IS) and business strategy along with its implications for perceived IS effectiveness and business performance is an important question, which is rarely studied in China. Based on an empirical study, this paper summarized the significance of IS strategic alignment and its impact on business performance. This study also measured business strategy, information system strategy, and information system strategic alignment, built a conceptual model to describe the relationship between these factors, and investigated their implications for information system performance and business performance. A structural equation model was employed to test the conceptual model. Analyses of data gathered in a survey indicate that information system strategic alignment is a better predictor of business performance than business strategy or information system strategy alone, although business strategy can significantly influence business performance. © 2008 Tsinghua University Press.