This study aims to test empirically the effect of policy understanding on the evaluation of government policies by the general public. Based on the 2010 Citizen Perception Survey conducted by The Knowledge Center for Public Administration and Policy, this paper examines whether the understanding of policy at the individual level affects the perception of the performance of public policy. Our regression analysis shows that negative evaluations of the performance of government policies on the part of citizens are significantly related to lower levels of policy-related knowledge and understanding. Furthermore, according to a comparative analysis of citizen groups at higher and lower levels of policy understanding, those with a higher level of understanding tend to value polices in a more positive way. In contrast, those with a lower level of understanding appear to value the polices negatively. These results suggest that the level of policy understanding plays a moderating role in the relations between other factors and the perception of policy performance. The results of this study imply that policy understanding on the part of the public plays an important role in successful policy implementation. Secondly, the results provide empirical support for normative arguments which have recommended paying attention to the level of policy literacy among the public.