One of the striking features of the economies of poor countries in the past decades has been the pervasive and vigorous attempt at promoting foreign direct investment. To poor countries like Tanzania; FDI has been regarded as key engine for fostering economic growth and transformation of their economies. Regarding to this remark, the aim of this project was to assess the impact of foreign direct investment in developing countries mainly Tanzania and use the results obtained to recommend the way forward that would be adopted to foster the expected benefits from FDI. The evaluation of the FDI impacts in the economy of Tanzania was based on the selected economic indicators such gross domestic product growth rates, export and import data, current account balances, balance of payments and gross fixed capital formation. Finally, the case study of FDI in China is analysed where lessons were gathered for other developing countries including Tanzania would learn in order to improve the current performance of FDI their economies. In assessing the impact of FDI in Tanzania, the study shows that FDI has not contributed much to the economic development of the country. Despite of the noted small economic impacts of FDI in Tanzania, I am still convinced that FDI is an integral part of an open and effective international economic system and important catalyst to country’s development if the certain conditions are attained. There are several reasons for poor performance, mostly being poor infrastructures in most developing countries. Based on these results, the challenges confronting poor countries in attracting FDI have continued to become more onerous. These countries are now necessarily called upon to be more creative and innovative in their strategies and methods in dealing with FDI to ensure broadly exploiting their national distinctive advantages. Additionally, it is argued that less developed countries need to learn from other countries such China that proved the excellent performance in FDI as per case study.