This paper re-examines the FDI-growth nexus by focusing on the role of governance quality as a structural condition shaping how foreign capital is absorbed into developing economies. Using a balanced panel of 53 countries from 2003-2021, we construct a composite governance index based on all six Worldwide Governance Indicators to capture the systemic nature of institutional quality. Baseline pooled, fixed-effects, and random-effects estimates show that both FDI and governance exert independent, positive effects on per capita GDP growth. When interaction terms are introduced, governance signifcantly amplifies the growth impact of FDI, suggesting that institutional quality serves as an absorptive mechanism rather than a mere control variable. We explore dynamics and address potential endogeneity issues by employing the Generalized Method of Moments (GMM). To investigate nonlinearities, we employ panel threshold regression and fractional polynomial techniques. The threshold model identifies statistically significant governance regimes in which FDI becomes substantially more growth-enhancing, while the fractional polynomial specification reveals an S-shaped relationship between governance and growth, with reform gains strongest in very low and very high governance environments. Across all methods, the results confirm three robust insights: FDI consistently promotes growth, governance strengthens this effect, and the FDI-growth relationship is fundamentally nonlinear. The findings underscore that foreign investment yields its highest returns in institutional environments capable of effectively converting external capital into productive domestic outcomes.