A B S T R A C T: A study undertaking to measure the efficiency of the banking industry in Bahrain and the factors determining that efficiency has been conducted. Utilizing a two-stage Data Envelopment Analysis (DEA) to measure the efficiency level in the first stage, through a balanced panel encompassing 15 banks in Bahrain, to compare the efficiency over the period 2008-2016. A second stage DEA analysis was carried out in which banking efficiency scores were regressed against alternative proxy variables for country- and bank-specific variables. According to the study, the efficiency rate in Bahraini banks rose between 2008 and 2011 but has since declined. Ineffective scale was the principal source of inefficiency for Bahraini banks, as their return to scale was decreasing. Bahraini policy- makers and regulators should therefore refrain from supporting business expansion in the banking sector. A negative sign is confirmed by the capital variable (CAR). The credit risk indicator, LNP, had a significantly negative impact on bank efficiency. Banks which had lower ratios of loan loss reserves to total loans exhibited higher efficiency. Originality/value: There is no literature related to the Bahraini banking industry that explores the concept of two-stage DEA. This study aims to fill a gap in the literature by providing a research perspective on Bahrain's banking industry. There has been no previous study that evaluated the efficiency of Bahraini banks and evaluated the factors determining it.