Foreign assistance is considered to play an important role in socioeconomic development of the developing countries. Since July 1951 Pakistan has received foreign assistance from USAID in different forms for various purposes. However, empirical data are limited to evaluate the effectiveness of all the aspects of foreign aid in Pakistan. Therefore, this study was initiated with an objective to determine the effectiveness of USAID assistance provided in the health sector during 2004 to 2009 in Upper Dir District of Khyber Pakhtunkhwa Pakistan. The survey was conducted in 2010 in two districts Upper Dir as treated and Lower Dir as non-treated of KP. A Sample size of 494 families covering 1047 children was questioned in both districts. The variables studied related to health sector included child health (birth weight and size, immunization, diarrhea, treatment of diarrhea, fever, acute respiratory infection and their treatments) infant and child mortality (gravidity, parity, neonatal, post neonatal, infant and child mortality, cause of child death) maternal mortality (causes of the woman''s death, maternal rates and ratio) and health infrastructure physical health infrastructure, human resources. A conceptual framework for impact evaluation developed by multilateral financial institutions was adopted to collect and analysis data in this study. The household level impacts were measured by computing the difference of the value of the outcomes of health variables between the treatment and comparison households as simple differences between treatment and comparison households provided impact estimates. The results of this study indicated that USAID assistance doesn''t bring any positive change in the child health, infant and child mortality rate, maternal mortality rate and ratio in the Upper Dir District as comparedXIII with Lower Dir District having received no such assistance. However there was a positive change in infrastructure, which is a prerequisite to provide health facilities if properly utilized. But that infrastructure was not properly used to improve health indicators. It may be concluded from this study that foreign assistance did not show any effect in the health improvements of the area. However it may have caused positive changes if it were properly utilized. So further research is needed to pinpoint the various causes for non- efficiency and non-effectiveness of this foreign assistance and suggest remedial measures accordingly to enhance the quality of life in these undeveloped areas of KP .