We examine the role of foreign aid and foreign direct investment (FDI) in reducing poverty in less developed countries (LDCs). Using panel data, our analyses suggest the effectiveness of foreign aid in reducing poverty depends on the measure of aid, the type of data analyzed, and the method of analysis employed. Overall, our findings suggest that FDI is largely ineffective in reducing poverty, and that U.S. agricultural aid has a small but significantly negative effect on reducing poverty in LDCs.