The primary objective of this study is to build a new and reliable CGE(computable general equilibrium) model for analyzing the economic effects of Free Trade Agreements(FTAs) between Korea and other nations. Trade liberalization through implementing the FTAs with major nations is very essential for Korea to maintain and raise its level of economic growth because the Korean economy is heavily dependent upon trade. FTAs with these nations are expected to bring about great economic effects. Thus, a very scientific and advanced tool is needed for the analysis on the economic effects of FTAs. Previous research on the impacts of FTAs between Korea and other nations has been done by using the GTAP(Global Trade Analysis Project) model. However, since the GTAP model assumes the exogeneity of technical progress and exclusion of factor mobility among nations, the important dynamic effects of FTAs such as growth in productivity and foreign direct investment cannot be included. The KERI-CGE model that is constructed and used for the analysis of the impact of Korea-EU FTA in this study complements the weakness of GTAP model. The KERI-CGE model is the fully dynamic computable general equilibrium model which reflects the economies of scale generated by capital accumulation and technical progress endogenously. Another advantage of the KERI-CGE model is that the model allows rational evaluation of FTAs' employment effect because labor and leisure are determined endogenously by the model's nature. In this study the economic effects of Korea-EU FTA is analyzed using this model under six scenarios that differ on the degree of openness. The macroeconomic effects of Korea-EU FTA derived in this study are as follows. Korea can be estimated to mark 1.28~3.59% increase in GDP growth rate for 2010 while estimated increase in GDP growth rate of the EU is 0.023~0.36%. Trade between Korea and the EU is also expected to increase dramatically after the implementation of Korea-EU FTA. However, due to trade-diversion effects from Korea-EU FTA, trade within  the EU is projected to decrease drastically. According to the results of this study, Korea and the EU will enjoy further increase in GDP and trade if service industry is liberalized. The estimated employment effect for Korea due to the implementation of Korea-EU FTA will be impressive. Employment in Korea is estimated to increase from 114,500 up to 350,000. The results of this study imply that in the negotiation of Korea-EU FTA, Korea needs to adopt a positive attitude towards liberalization of service sector to generate greater employment effect.