IF THERE IS A CORRECT ARRANGEMENT AND BudgetARY DISCIPLINE IN GOVERNMENT FUNDING, GOVERNMENT SPENDING IN THE REALM OF STRATEGIC AND FUNDAMENTAL IMPERATIVES CAN LEAD TO A PROTECTIVE EFFECT; THIS MEANS THAT ANY INCREASE IN GOVERNMENT SPENDING AS A SUPPLEMENT AND INFRASTRUCTURE, INCREASES FOREIGN DIRECT INVESTMENT. FOR THIS, THE PRESENT THESIS EXAMINES RELATIONSHIP BETWEEN Deficit AND FOREIGN DIRECT INVESTMENT IN IRAN. THIS HAS COMPOUNDED IMPORTANCE OF GOVERNMENT'S FOCUS ON FOREIGN DIRECT INVESTMENT IN RECENT YEARS TO OFFSET STATE Budget Deficit. IN THIS PAPER, PROPOSED MODEL IS USED TO ASSESS RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND SHORT AND LONG TERM IMPACTS OF THE Budget Deficit FOR THE YEARS 1997-2014 (IN QUARTERLY MANNER). ACCORDING TO RESULTS, EFFECT OF SHORT-TERM DYNAMIC MODEL ESTIMATE ON GOVERNMENT Deficit VARIABLE FOREIGN DIRECT INVESTMENT IS NEGATIVE AND SIGNIFICANT. EFFECT OF VARIABLE GDP ON Budget Deficit IS NEGATIVE BUT STATISTICALLY SIGNIFICANT.