This study aims to look at the impact of zakat distribution on aggregate consumption in viewof zakat distribution by zakat institutions is mostly in the form of money for basic needs andmonthly cash support. The study uses panel data of states in Peninsula Malaysia and analysisis done by using the fixed effect model. The study finds that zakat distribution has a positifimpact on aggregate consumption. However, the impact is small and short run. Hence thisstudy recommends that zakat distribution should be not limited to the fulfilment of consumableneeds only but should also cover other forms of monetary aid that can generate a continuousflow of income for zakat recepients.