This paper deals with relaxation approximations of nonlinear systems of hyperbolic balance laws. We introduce a class of relaxation schemes and establish their stability and convergence to the solution of hyperbolic balance laws before the formation of shocks, provided that we are within the framework of the compensated compactness method. Our analysis treats systems of hyperbolic balance laws with source terms satisfying a special mechanism which induces weak dissipation in the spirit of Dafermos [Hyperbolic systems of balance laws with weak dissipation, J. Hyp. Diff. Equations 3 (2006) 505–527.], as well as hyperbolic balance laws with more general source terms. The rate of convergence of the relaxation system to a solution of the balance laws in the smooth regime is established. Our work follows in spirit the analysis presented by [Ch. Arvanitis, Ch. Makridakis and A. E. Tzavaras, Stability and convergence of a class of finite element schemes for hyperbolic conservation laws, SIAM J. Numer. Anal. 42(4) (2004) 1357–1393]; [S. Jin and X. Xin, The relaxation schemes for systems of conservation laws in arbitrary space dimensions, Comm. Pure Appl. Math. 48 (1995) 235–277] for systems of hyperbolic conservation laws without source terms.