Numerous　studies　on　foreign　direct　investment　(FDI)　as　a　prime　element　of　capital　flow　and　external　finance　contribute　to　foreign　physical　stock　of　capital,　knowledge　spillovers,　transfer　of　technology,　and　recipient　countries＇　employment.　Developing　economies　need　FDI　to　boost　their　economic　growth.　This　study　explores　the　moderating　role　of　national　absorptive　capacity　between　FDI　inflow　and　institutional　quality　(control　of　corruption,　government　effectiveness,　political　stability　and　the　absence　of　violence,　regulatory　quality,　rule　of　law,　voice　and　accountability)　on　a　panel　of　113　developing　countries　for　2000-2019.　Hausman　fixed-effect　and　random-effect　estimation　are　used　in　the　analysis.　The　results　show　that　national　absorptive　capacity　(AC)　moderates　the　relationship　between　FDI　inflow　and　institutional　quality　dimension.　To　check　robustness,　we　formed　an　index　of　institutional　quality　(OIQ)　dimensions　through　principal　component　analysis　(PCA)　and　regressed,　demonstrating　that　AC　moderates　the　relationship　between　OIQ　and　FDI.　Subsequently,　taking　BRICS　+　Pakistan　as　a　sample,　we　find　that　the　results　hold.　This　study　will　help　form　FDI-friendly　policy　in　developing　countries.