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Service loyalty, with its final effect on repurchasing by customers, appears to have received relatively little attention. This study begins with delineating the concepts of service quality and service loyalty and proceeds to distinguish between service quality and customer satisfaction. A mediational model that links service quality to service loyalty via customer satisfaction is proposed. Appropriate measures are identified and a postal survey is undertaken among 250 Mellat Bank’s customers. A response rate of 58.8 per cent is obtained (n147). Results indicate that customer satisfaction plays a mediating role in the effect of service quality on service loyalty. The effects of SERVQUAL dimensions on service loyalty and customer satisfaction are also reported. The outcomes illustrate the performance of bank in all dimensions is less than customer’s expectations. In other words, the quality of services provided by Mellat Bank is quite poor.