Tourism plays an important role in the expansion of a country’s economy but it is also strongly linked with environment. The linkage of tourism with environment is complex as much worse impacts are attached with tourism related activities. This study inspects the economic and environmental cost related with tourism and its impacts on local residents in the district Abbottabad, Khyber Pakhtunkhwa, Pakistan. Primary as well as secondary data is used. The responses of respondents including local residents, tourists, hotel managers and shopkeepers associated with economic and environmental costs are being captured via Questionnaires and interviews. It is found that tourism affects, in terms of increase in traffic congestion, prices of good, littering and noise pollution. It is recommended that tourism can contribute in environmental conservation, if element of sustainability is included in planning and management process. Supervisor: Dr. Anwar Hussain