This chapter examines the role of foreign direct investment (FDI) in Bulgaria’s economic transformation, highlighting its evolution, sectoral distribution, and policy framework. It traces Bulgaria’s FDI journey from the early 1990s, marked by political instability, through EU accession-driven inflows, to recent trends shaped by global disruptions and reshoring dynamics. The analysis reveals that while Bulgaria successfully attracted substantial FDI, particularly in around the EU accession years, much of it concentrated in low-value, non-tradable sectors like real estate, wholesale and retail trade, limiting long-term economic benefits. Recent shifts indicate a resurgence in manufacturing and knowledge-intensive sectors such as ICT and professional services, reflecting Bulgaria’s potential as a hub for advanced industries. However, challenges persist, including governance issues, labor shortages, and regional disparities, with FDI heavily concentrated in Sofia. The chapter critically evaluates Bulgaria’s FDI policies, emphasizing the need for strategic reforms to attract high-value investments, enhance technological capabilities, and address regional inequalities. It concludes by advocating for a paradigm shift in FDI strategy—moving from a focus on cost-based incentives to fostering innovation, sustainability, and institutional resilience—to maximize FDI’s transformative potential for inclusive and sustainable economic growth.