This research will focus on the relationship between the development of stock market and macroeconomic variables in Malaysia. Generally, the purpose of this research is to observe this relationship in the Malaysian context. In order to achieve the objective, Vector Auto Regression (VAR) estimation method was applied on the created research model. The variables involved in this research were the FBM Emas Shariah index (FBMES) used as proxy for Islamic stock market, FBM Kuala Lumpur Composite Index (FBMKLCI) used as proxy for conventional stock market, Industrial Production Index (IPI), Consumer Production Index (CPI), Aggregate Money Supply (M3), Islamic Inter Bank Rate (IIR), Treasury Bill Rate (TBR) and Exchange Rate of Malaysian Ringgit-United States Dollar. This research utilised monthly data from January 2007 to December 2011 taken from authorized sources. The findings showed that stock prices in Malaysia (Islamic and conventional) are co-integrated with the selected macroeconomic variables in which the stock prices is related positively and significantly with IPI and CPI variables but related negatively and significantly with M3, IIR, TBR and MYR variables. From the aspect of Granger causal relationship, it is found that variables of IPI and IIR are the Granger cause for FBMES in the short term. On the other hand, no variables can be proved as granger cause for FBMKLCI.