An ideal fiber optic rotation rate sensor is shot noise limited. In present day technology, the maximum power that can be received at the detector end of the sensor is of the order of 1 to 10 µw. This corresponds to a minimum detectable rotation rate of 0.1 deg/hr to 0.035 deg/hr for a sensing coil length of 500 meters and radius 10 cm, operated at 1.3 µm wavelength. However a practical rotation sensor is limited by thermal noise of the load resistance, back scattering noise in optical fiber, polarization induced noise, source intensity noise and noise in processing electronics. These noise sources cause long term offset at sensor output resulting in drift. We have analyzed and estimated the various noise sources with an objective to achieve optimum performance of a fiber optic rotation sensor. The noise equivalent rotation rate due to various sources has been calculated for different values of optical power, wavelength of operation, length of the fiber and detection bandwidth. Polarization filtering, coherence length of the optical sources, phase modulator amplitude and frequency stability were analyzed to yield optimal system performance. Other effects which cause drift in rotation sensor such as Faraday effect and Kerr effect have also been considered.