Despite economic liberalization, corruption in developing countries grows unabated. We analyze this puzzle, focusing on foreign direct investment (FDI). FDI liberalization increases investment, expanding opportunities for bureaucratic corruption. Local politicians abuse their bureaucratic oversight authority to encourage and profit from this corruption. We exploit India’s 2005 FDI liberalization to identify FDI’s effects on observable implications of bureaucratic corruption. In FDI-exposed districts, bureaucrats susceptible to political pressure were more likely to be transferred and appointed to corruption-lucrative posts. Leveraging close legislative elections in FDI-exposed districts, we show abnormal asset growth among only winners with influence over transfers. After liberalization, only majority-foreign-owned firms reported more corruption demands. We find no evidence that politicians transfer bureaucrats to prevent corruption or maximize positive spillovers from FDI. Our findings highlight FDI as an income shock that fuels corruption and demonstrate that local politicians in developing democracies view FDI as a source of corruption rents.