Outsourcing of HR functions in organizations is still evolving in Tanzania and the rationale for outsourcing is essentially the same in both public and private sectors. Precision Air has adopted the outsourcing of its HR Functions in order to keep services at higher level and meet customers’ maximum satisfaction and cut costs. However, the vital question of whether outsourcing affects airlines performance positively has not been solved. Challenges and implications of this outsourcing decision are not yet entirely understood. This study sought to find out the challenges of outsourcing human resource functions in Precision Air in Dares Salaam. The study had the objectives of bringing out the understanding of how outsourcing is executed at Precision Air, finding out the significance of outsourcing at Precision Air and determining the challenges facing Precision Air when performing outsourcing of HR functions. The study used case study research design for data collection. The Research was conducted at Precision Air Services Plc (operating as Precision Air) situated in Dar es Salaam region, Tanzania. The target population was 125 management level employees of Precision Air. A sample of 95 management level employees was selected. Data collection was through questionnaires and interviews. Qualitative data was grouped and analyzed qualitatively which involved descriptions and clarifications to the observed data. Quantitative data was tabulated and presented into percentages and frequency distributions. Presentation was through tables and figures. Study findings indicate that Precision Air has laid down procedures that must be followed in any outsourcing decision. Challenges faced by Precision Air in HR outsourcing included loss of organizational learning, loss of command on the outsourced activities and disintegration of internal competence. Other challenges included loss of control in decision making, motivation loss of employees in regard to the outsourced services and loss of employee loyalty. The study has the following policy implications. First, organisations should be aware of which HR functions to be outsourced. Secondly, an organization should have laid down procedures and steps in any HR outsourcing decision process. Finally, the organization needs to have a useful hierarchical categorization and logical framework on how to assess and analyse outsourcing.