The services sector has been the largest contributor to Malaysia's Gross Domestic Product (GDP) since independence. Under the New Economic Model, the growth of this sector is targeted for foreign direct investment (FDI) promotion in selected services sector that can generate higher value-added activities. Nevertheless, there is a paucity of empirical studies on the determinants of FDI inflows in the services sector in most countries, including Malaysia. The literature review in this research shows that studies on Malaysia have not examined the determinants of FDI by service sub-sectors and over time. Moreover, studies that examined the role of FDI restrictiveness in services are cross-country studies. In view of this research gap and the policy aspirations of Malaysia, this study aims to examine the key factors that influence inflows of FDI in selected service sub-sectors over time, by taking into account the role played by regulatory restrictiveness as well as ownership and internalisation advantages. The findings of this study will assist policy makers to formulate appropriate policies for attracting FDI into services, as targeted. Based on Dunning's Eclectic or OLI Paradigm as the theoretical framework, FDI inflows are determined by macro and micro variables in the form of ownership (O), locational (L) and internalisation (I) advantages of the investor and host economy. This framework is empirically tested using a mixed methods approach for eight selected services sub-sectors, based on the availability of data. A services regulatory restrictiveness index (SRRI) was first constructed as a proxy for market liberalisation based on primary data sourced from a survey and focus group discussions with various government agencies, and national documents. Then, secondary data from the Department of Statistics Malaysia is used for the panel data econometric model on the inflows of FDI in the services sector for the period between 2003 and 2010. Finally, eight case studies were conducted using semi-structured interviews and content analysis with purposive sampling of service firms in each of the selected sub-sectors, and also secondary data obtained from the firms' websites as well as official documents. The overall findings support OLI paradigm in that investors in the services sector are also resource-, market- and efficiency-seeking firms, similar to that of the manufacturing sector. Based on the SRRI, the findings show that liberalisation has not improved very much and extent of liberalisation varied from one sub-sector to another. Consequently, this variable was found to be insignificant in the regression analysis. The results from the regression analysis show that 'L' advantages, namely, market size, human capital and communications infrastructure have strong relationships with FDI inflows. The case studies complement the results of the regression by confirming that 'L' advantages together with 'O' advantages of branding, skills, technology, service standards, global experience and network, and 'I' advantages such as quality control, are the main determinants of FDI inflows in services. These results suggest that Malaysia needs to provide a more liberalized market, leverage on education and communications infrastructure, and upgrade the quality human capital to increase the attractiveness of its investment climate for services. Since service sub-sectors are heterogeneous and each sub-sector has its own regulatory framework, reforms on regulations that impede growth have to be tailor-made to the needs of the specific sub-sector.