In many developing countries, natural gas, wood, or biomass fired cookstoves find prolific usage. Skirts, placed around the cookpot, have been proposed as a means to improve the thermal efficiency. However, use of skirts has shown conflicting results, and the role of skirts is poorly understood. In this study, a computational heat transfer analysis of a generic third-world cookstove is conducted with the goal to understand the effect of various skirt-related parameters on the overall heat transfer characteristics and thermal efficiency. A computational fluid dynamics model, including turbulence and heat transfer by all three modes, was created. The model was first validated against the experimental data, also collected as part of this study. Unknown parameters in the model were calibrated to better match the experimental observations. Subsequently, the model was explored to study the effects of several skirt-related parameters. These include the vertical position of the skirt, the width of the gap between the skirt and the cookpot, and the thermal conductivity of the skirt (insulating versus conducting material). The computational predictions suggest that the skirt must either be made out of an insulating material or insulated on the outer surface by a backing insulating layer for it to provide maximum benefits. It was also found that it must be placed at an optimum distance away from the cookpot and aligned with the mouth of the cookstove chimney for maximum thermal efficiency. An optimum set of conditions obtained through this computational analysis resulted in an increase in the thermal efficiency from 20.7% to 28.7%.