Despite the huge number of studies in relation to the FDI, studies on the nexus between FDI and stock market development in GCC are still limited. This paper investigates the impact of FDI on stock market development in Gulf Cooperation Council countries that have become an important economic trading bloc after inclusion of Saudi Arabia in the G-20, leading to a big increase in stock prices and FDI in recent years. This research utilised data from 2002 to 2015 for all the six GCC countries i.e. Bahrain, Kuwait, Qatar, Saudi Arabia, the United Arab Emirates and Oman. Using four control variables, economic growth, economic size, openness and domestic credit to private sector and utilising the panel unit-root test, panel co-integration analysis and panel error-correction model, the research concludes that foreign direct investment has played a long-term significant role in stock market development in GCC countries. Moreover, the research results on short-term impact concludes that FDI affects stock market development positively but not significantly. From a policy perspective, the research evidence convincingly supports the increasingly growing initiative of GCC governments to attract flow of FDI towards non-oil based sectors to diversify their economies and develop stock markets.