The role and effects of foreign aid in the economic development of developing coun&ies have been controversial issues. Some economic studies of forei51 aid suggest that it is successful, as the other studies find no relationship between foreign aid and growth rate of output, and suggest that it also retards economic gowth in developing countries by leading to the sfructural distortions of the economy, This study has examined empirically the effectiveness and impact of foreigl aid on the economic development of Turkey from 1963 to 1990. A simultaneous equations model was developed and Three Stage Least Squares method was used to assess both direct and indirect effects of foreign aid on economic development of Turkey. The empincal results have made an important conuibution to understanding the role of foreigl aid as a determinant of the behaviotr of savings, gowth, invesünent, etc. in the Turkish economy. The basic conclusion in this study is that aid was successful and made a posifive contribution to the economic development efforts of Turkey over the period 1963-1990.