Under the background of attracting investment among local governments, it has important influence for the uneven distribution of FDI on economic welfare between urban and rural residents. Based on the data of Chinese cities, this paper has an empirical analysis on the relationship between FDI and economic welfare of urban and rural residents under the background of competition of attracting investment among local governments from two aspects of the municipal district and the outskirts of city. The results are as following: in the municipal district, FDI has positive effect on economic welfare of residents, and preferential policies are indirectly good for improving economic welfare of residents. In the outskirts of city, FDI has not significantly positive effect on economic welfare of residents, and preferential policies don't have positive impact on it. At the same time, under the concept of economic development of "heavy city, light country" among local governments, residents in the outskirts of city have assessed the cost of urban economic development and share weakened welfare level of them.