Ascriptive inequality in labor markets has been thoroughly investigated by sociological studies, exposing gender employment inequality in various labor markets worldwide. Most of these studies attribute the gender disparities in labor markets to firms’ preference for men rather than women when recruiting new staff. However, studies have paid less attention to the possible association between gender inequality and firm performance, which typically has a significant impact on the number of new employees hired. In order to better understand gender discrimination in employment, researchers should examine in greater detail organizational mechanisms through which firm performance may exacerbate or mitigate the disparities between men and women. Therefore, I investigated how firm performance influenced the proportion of women hired by firms. I used firm-level panel data from 2009 to 2012 to examine the longitudinal effect of firm performance on hiring new female employees for 867 major companies in Japan, where people’s first job after graduation largely determines their entire career due to the highly developed internal labor markets. The result indicated that better performance led firms to hire a greater proportion of women than normal, while poorer performance had the opposite effect. This research suggests that it is helpful and even necessary to pay attention not only to firms’ motives but also to their performance to fully explain gender inequality in labor markets.