Abstract:The squeeze-out effect of foreign direct investment(FDI)on China’s domestic investment is influenced by FDI flow-in characteristics and self-condition of host countries, as a result, significant difference in period and region can emerge. Empirical analysis shows that FDI has squeeze-out effect on domestic investment in China’s west regions during 1999-2010, among which the effect is not obvious during 1999-2004, however, its squeeze-out effect emerged during 2005—2010, and that FDI has squeeze-out effect in different regions, ‘economic circles’ and southwest area in China’s west regions, however, FDI has neutral effect in ‘non-economic circles’ and northwest area of China, thus, west area of China should enlarge foreign investment invitation, especially promote industrial support capacity for ‘non-economic circles’ and northwest area, enhance human capital investment and boost technical spillover of foreign investment.