  We study the $D$-term inflation scenario with a nonperturbative K\"ahler
potential of the dilaton field. Although the FI term which leads an
inflationary expansion is given by the derivative of the K\"ahler potential
with respect to the dilaton in heterotic string models with anomalous U(1), the
too large magnitude is problematic for a viable $D$-term inflation. In this
paper, we point out that the K\"ahler potential with a nonperturbative term can
reduce the magnitude of FI term to desired values while both the dilaton
stabilization and $D$-term domination in the potential are realized by
nonperturbative superpotential.
