This case study complements recent research on FDI in tourism in African countries conducted by the United National Conference on Trade and Development (UNCTAD). These projects aim to better understand the pro-development effects of tourism and tourism FDI in developing countries. The Gambia was chosen because of the significant role that both tourism and FDI have played in this country. An assessment of how tourism FDI impacts on the economy is made using data collected from a sample of foreign and locally owned hotels via an in-depth questionnaire, plus key informant interviews with stakeholders in the tourism sector. To determine the impact of FDI, a comparison is made between foreign and local hotels within similar categories (upmarket, midmarket and budget) in terms of a number of factors including employment, profitability, environmental sustainability and community linkages. This case study also discusses the challenges to tourism-induced development in The Gambia and the ways to enhance its socioeconomic contribution to poverty reduction.