Software effort estimation still remains a challenging and debatable research area. Most of the software effort estimation models take software size as the base input. Among the others, Constructive Cost Model (COCOMO II) is a widely known effort estimation model. It uses Source Lines of Code (SLOC) as the software size to estimate effort. However, many problems arise while using SLOC as a size measure due to its late availability in the software life cycle. Therefore, a lot of research has been going on to identify the nature of relationship between software functional size and effort since functional size can be measured very early when the functional user requirements are available. There are many other project related factors that were found to be affecting the effort estimation based on software size. Application Type, Programming Language, Development Type are some of them. This thesis aims to investigate the nature of relationship between software size and development effort. It explains known effort estimation models and gives an understanding about the Function Point and Functional Size Measurement (FSM) method. Factors, affecting relationship between software size and development effort, are also identified. In the end, an effort estimation model is developed after statistical analyses. We present the results of an empirical study which we conducted to investigate the significance of different project related factors on the relationship between functional size and effort. We used the projects data in the International Software Benchmarking Standards Group (ISBSG) dataset. We selected the projects which were measured by utilizing the Common Software Measurement International Consortium (COSMIC) Function Points. For statistical analyses, we performed step wise Analysis of Variance (ANOVA) and Analysis of Co-Variance (ANCOVA) techniques to build the multi variable models. We also performed Multiple Regression Analysis to formalize the relation.