Under the Kenya vision 2030, the financial services sector aims at creating a vibrant and globally competitive financial sector promoting high-levels of savings and financing for Kenya‟s investment needs. It also aims to ensure macroeconomic stability as well as reducing the volatility of returns in Nairobi securities exchange. This study aimed at investigating the macroeconomic variables and stock market return in Nairobi securities exchange limited. The study focused on exchange rate, inflation, government spending and the oil price as the macroeconomic variables under study. Arbitrage pricing theory was used to link the macroeconomic variables and the stock market return. Monthly Published time series data from January 2001 to December 2013 was sourced from CBK, KNBS and NSE. Regression analysis was done using ADF test for unit root and Johansen for co integration. Toda and Yamamoto Granger causality was applied to establish the causal relationship between the set of macroeconomic variables and the NSE 20 share index while Power Garch model was employed to determine the volatility. Diagnostic test showed that all the variables are integrated of order one. The co integration test confirmed presence of long run relationship between the NSE stock market 20 share index and the selected macroeconomic variables. The analysis revealed a uni-directional relationship which runs from the NSE stock market index to the inflation rate, a uni directional relationship from foreign exchange rate to NSE index and a bilateral causality between oil price and the stock market return. Presence of arch effects was noted and that the results of the power Garch model show that the magnitude of shocks has a significant impact on volatility of stocks. The study showed that exchange rate contributes greatly and significantly to volatility of stock returns at Nairobi securities exchange. The findings of this study provide evidence of a relationship between stock market return and macroeconomic variables in the economy. The government of Kenya should put proper and quality measures to ensure the stability of Kenya shilling against the dollar as well as increasing production of energy locally so as to reduce the cost of production as well as suppressing the rate of inflation in the economy. This study recommends that Policy makers, and investors, need to take the macroeconomic variables into consideration for proper decision making process to enhance economic growth and development.