Although the functional enhancement and price decrease of computer hardware have rapidly increased the popularity of computers, quality software is the key to determine the value of information systems. Unfortunately, software development is a highly uncertain business. Many projects fail or escalate. Since software development is a labor and knowledge intensive taks, proper management of team composition is a critical research issue. The purpose of his research is to explore the relationship between knowledge diversity of software team and project performance. Research on team composition and performance is not new. However, few have studied the relationship on software development team. In this research, a research framework based on conflict theory is developed and an empirical study was conducted on Taiwanese firms to examine the extended model. Major funding include (1) knowledge diversity has significant positive effects on task conflict, and the task conflict has significant positive effects on team learning, (2) value diversity has positive effects on relationship conflict, and the relationship conflict has positive effect on the quality of interaction. These findings are useful in helping decision makers to manage software project teams by selecting the right team members.