The growth of FDI in the world has been significant in recent years. Between 1990 and 2000 world’s FDI inflows increased more than five times, and after 2000 world’s FDI inflows have declined. During the period of FDI expansion, growth has been especially strong since 1997. However, most of the FDI transactions were between the developed countries. The distribution of FDI is unequal and less developing countries face difficulties in attracting FDI. Despite the fact that FDI is increasingly important to developing countries, over the past few years the share of the developing countries in world’s FDI inflows has been declining. This study analyses the determinants of FDI inflows in Rwanda, the study employs an econometric technique to analyze various variables included in the model. In the examination of determinants of FDI inflows into Rwanda, we proposed foreign direct investment as the endogenous variable on which the exogenous variables are econometrically regressed using E-views version 3.1. These variables include, GDP growth, inflation, economic openness and real effective exchange rate We used OLS to estimate the parameters, and used residual-based cointergration me