In this study, the effects of real exchange rates movements on employment in the case of Turkish manufacturing industry were analyzed. Keeping the national currency overvalued against foreign currencies for different purposes has led to significant effects in the economy in Turkey. In 2001, the transition to a flexible exchange rate system, the rise in real exchange rate (overvaluation of national currency against foreign currencies) has become more pronounced, and this has led to structural transformations in production and foreign trade sector. It has been found that dependency of both exports and production on imports increased and that production were increased in relatively technology-intensive industries with high rates of dependency on imports. Likewise, the amount of capital per worker in manufacturing industry increased, and therefore labor-capital ratio deteriorated in favor of capital. We also found that firms operating in the manufacturing industry meet their financing needs by borrowing heavily in foreign currency, and this situation contributes to increase dependence on imported inputs. High real exchange rate developments prepared the way for the manufacturing industry in which the relationship between production and employment has been weakened.