This study investigates the relationship of investment and cash flow in the presence of financial constraints of firms. Dividend, size and age are used as measure of financial constraint for firms and are applied to segregate the whole sample in to constrained and unconstrained firms. The Tobin?s Q, profitability, liquidity, leverage and sales growth are used as control variables. The topic is significant as it has limited research in developing countries as well as in Pakistan. The data for the period from 2004 to 2013 of the non-financial sector?s firms is used which are listed on Karachi stock Exchange. The fixed effect model of panel data is applied for data analysis. The findings reported the existence of relationship between investment and cash flow. It also showed that the investment-cash flow sensitivity is high for financially unconstrained firms and low for financially constrained firms. The results of the study are in line with the findings of Kaplan and Zingales (1997). Hence, it can be stated that the investment-cash flow sensitivity is inversely related to the firms constrained status.