Budget allocation plays a critical role in determining the quality and efficiency of healthcare service delivery in public hospitals. This study examined the relationship between budget allocation and healthcare service performance at Mulago National Referral Hospital in Central Division, Kampala, Uganda. The study employed a cross-sectional research design with both quantitative and qualitative approaches. A sample of 254 respondents comprising hospital administrators, medical staff, and finance officers was selected using stratified random sampling. Data were collected through structured questionnaires and document review of budget reports from 2020-2023. Statistical analysis included Pearson correlation and regression analysis using SPSS version 25. The study revealed a strong positive correlation (r = 0.756, p < 0.01) between budget allocation and healthcare service performance at Mulago Hospital. Budget allocation for medical supplies showed the strongest relationship with patient care quality (r = 0.823, p < 0.01). Infrastructure development funding correlated significantly with service efficiency (r = 0.691, p < 0.01). Staff welfare allocations demonstrated a moderate positive correlation with employee productivity (r = 0.634, p < 0.05). Budget adequacy was rated at 43.7%, indicating substantial funding gaps. The regression model explained 68.4% of the variance in healthcare performance (R² = 0.684). Budget allocation significantly influenced healthcare service performance at Mulago Hospital. Adequate funding for medical supplies, infrastructure, and staff welfare directly enhanced service delivery quality, patient satisfaction, and operational efficiency. However, persistent budget constraints hindered optimal performance. The Ministry of Health should increase budgetary allocations to Mulago Hospital by at least 35% to address critical funding gaps. Hospital management should prioritize transparent budget utilization and strengthen monitoring mechanisms. Investment in staff training and infrastructure modernization should be prioritized to improve service delivery outcomes.