This study analyzes the effect of foreign aid on economic growth of developing Asian countries for the period of 1984 to 2013. In literature there exist significant ambiguity about the sign and magnitude of the effect of foreign aid on economic growth. This study emphasizes on the role of policy and political stability for aid on growth. The main findings of this study is that, foreign aid is found to be growth promoting given good governance by using fixed effects in a static panel framework whereas dynamic panel shows a variation in growth. The finding of a significant foreign aid growth relationship suggest that increased aid to developing Asia is one way to achieve higher economic growth if there is political stability and sound economic policies. Supervisor: Dr. Attiya Yasmin Javid