On the basis of theoretical and empirical studies one can suggest that foreign capital inflow may have either a positive or negative effect on domestic saving. Using the single equation method (SEM) Alamgir (1974) has found a positive relationship between domestic saving and foreign capital inflow in the case of Bangladesh. But his findings are different from those of the author, because using the SEM the author has obtained a significantly negative relationship between them. But the single equation estimate considers only the direct effect of foreign capital inflow on domestic saving. For this reason the author has considered the indirect effect, in addition, by using the Two-Stage Least Squares (2SLS) method. As a result of the use of the 2SLS method, the author has obtained a non-negative effect of foreign capital inflow on domestic saving in the case of Bangladesh. The non-negative effect suggests that the government of Bangladesh did not relax its saving was not substituted by foreign capital inflow. Furthermore, it does not preclude the possibility of a complementary relationship between domestic saving and foreign capital inflow.