Interest in psychological empowerment and employee engagement has increased substantially over the last decade among practitioners and academicians. However they have emerged independent of each other with little diligence as to how they are associated. The study attempts to predict employee engagement through dimensions of psychological empowerment. This article will contribute to our understanding of the relationship between psychological empowerment and employee engagement. The study is based on primary data collected from 101 employees working in three service organizations in central Kerala. Statistical techniques like correlation and multiple regression analysis were employed to measure the significance and strength of relationship between psychological empowerment and its dimensions (meaning, competence, self-determination and impact) and employee engagement. Correlation analysis revealed a significant positive association between psychological empowerment and employee engagement. Further analysis showed that all the dimensions of psychological empowerment, other than self-determination are predictors of employee engagement. Findings of the study are discussed, together with limitations and suggestions for future research.