Faced with escalating demand for instructional staff to serve the expanding undergraduate enrolments, many middle income countries in Southeast Asia are investing heavily in expanding their provision of graduate education. An attractive secondary benefit is that graduate programmes contribute to a local university-based research capacity that governments believe will result in a positive economic return to the country. This paper presents the results of a case study of the dynamics associated with growth of graduate education in the two countries that lead the region in the development of graduate education, Malaysia and Thailand. The study further elaborates the reasons that higher education institutions in these two countries are expanding their graduate-level programmes, how the growth of graduate education is affecting the professional lives of the faculty members and administrators leading those programmes, and elaborates institutional-level issues associated with this expansion.