The use of peer appraisals has been widely acclaimed, but how useful are they really? Student groups made non-anonymous ratings of peer performance on two group tasks, and the ratings contributed to the students' course grades. Groups differentiated very little among peers in their performance ratings. Individuals in non-differentiating groups reported more positive distributive and procedural justice, satisfaction, and turnover intent than did individuals in differentiating groups. In differentiating groups, no differences in attitudes were found between individuals who were differentially rewarded or penalized for their performance. Implications for peer appraisal practice and future research are discussed. © 2001 John Wiley & Sons, Inc.