This paper attempts to examine the effect of foreign capital inflow on growth of output, domestic saving, imports and production structure. In doing so, a simultaneous equation model for the Bangladesh economy in the framework of the dual gap analysis has been estimated using the time series data for the period 1069/61-1979/80. It is found that foreign capital inflow was conductive for economic growth. It has substituted domestic saving as the government might have relaxed saving efforts with its inflow. It increased the productive capacity of the economy financing the development projects. It facilitated the expansion of the tertiary sector. The increased services from the tertiary sector along with increased imports of raw materials and intermediate goods (financed by it) increased output in the primary and manufacturing sectors. Thus foreign capital inflow changed the production structure of the economy with resulting changes in the composition of GDP, exports and imports.