The use of Internet tools in economic pedagogy is growing. This paper attempts to investigate the impact of Internet tools, as a supplement to traditional teaching methods, on teaching and learning and attempts to answer the question why there are gaps between potential and reality of using Internet tools in economics education, based on our experience of integrating e-learning into courses at Lancaster University. Responses to student questionnaires suggest that the practical features of e-learning which are most successful at enhancing the learning experience are: the noticeboard, discussion space, multiple-choice questions and freedom of expression anonymously. Moreover, the degree of the impact of these e-learning features is affected by network access, residence off campus and student gender. In spite of the enormous potential of the Internet tools in higher education, it is found that much of it is not fully realized due to the problems encountered by lecturers/tutors and students and technical difficulties. It is important to note the many challenges associated with e-learning which are yet to be debated and resolved.