In this study we investigate the determinants of tobacco consumption and the effect of tobacco consumption on health spending in Pakistan. For this purpose, we used Household Integrated Economic Survey (HIES-2015-16), conducted by Pakistan Bureau of Statistics (PBS) while implying Seemingly Unrelated Regression (SURE) model. We accounted for different household level characteristics in our analysis such as household income, household head education etc. Our findings show that there is positive and significant relationship between tobacco consumption and health expenditure in Pakistan, showing that those households who consumes tobacco spends more on health obviously due to the increase in tobacco related diseases. Thus, it is recommended that consistent and coherent tobacco taxation policies with a dual objective to reduce prevalence of tobacco consumption and raise revenues to offset the negative health implications of tobacco use. Tobacco Consumption and Heath Expenditures have a positive relationship. There is.a dire need to decrease tobacco consumption in Pakistan to decrease burden on healthcare facilities. Supervisor:- Dr. Muhammad Jehangir Khan