This thesis tries to determine some of the driving force behind Swedish foreign direct in-vestments into the Baltic counties. The analysis is performed in three steps, first we analyze global FDI into transitional economies, and afterwards we look at Swedish FDI and com-pare it with German FDI. The determinants examined are index of economic freedom, R&D intensity, trade balance, wage level and proximity. The analyzed period is form 1995 to 2005. The analysis use data on the following transition countries Latvia, Lithuania, Esto-nia, Poland, Hungary, Czech Republic, Slovak Republic, Slovenia, Croatia, Romania and Bulgaria. The results show that the determinants vary across the countries. The motives of Swedish and German investors differ. Thus, for Swedish investors R&D, economical free-dom and trade balance are the influencing factors, but for Germany only trade balance and wage level are important. The conclusion is that different determinants triggers foreign di-rect investment in transitional economies in different ways.