Abstract: According to the Cobb-Douglas' production function, a quantity model was developed including a basic model and extension one with some assumptions given. To verify the assumptions, the technology spillover effect of foreign direct investment (FDI) on the equipment manufacturing industry in Shenyang was studied empirically with the relevant data from 1999 to 2003 taken as reference. The results showed that FDI has contributed greatly the technology spillover effect to the equipment manufacturing industry in Shenyang. All the three factors selected have obviously positive influence, i.e. the market competition, labor mobility, and the opening degree of industry. Such a conclusion is important and beneficial to taking advantage efficiently of FDI and improving its technology spillover effect.