Rise of extremism and terrorism, deteriorating prospects of Pakistans security and peace is considered as a result of Islamabads own flawed policies, mismanagement, lack of social justice and rule of law, and increasing mistrust between the government and public.This study focuses on policies and performance of the Pakistans military regime and democratic governments, since Pakistan became United States frontline non-NATO ally in the US-led War on Terror in Afghanistan.The study approaches to the subject matter through the analysis of historical perspective of the genesis of extremism and terrorism in Pakistan and states use of religion and militants groups as strategic assets to fulfill its strategic interests in the region, which led to radicalization of the society.The study critically analyzes Pakistans counter-terrorism strategy adopted in the aftermath of 9/11 terrorist attacks and assesses its effectiveness in uprooting homegrown militancy within Pakistan, especially the militant outfits, which have links with Al-Qaeda network.In this respect, present study not only defines and assesses Pakistans counter-terrorism strategy but also analyzes several contributing factors that affected its efficacy and shows the continuation of military-driven national security policy despite changed demands in the drastically changing scenario of post-9/11 environment of the region.Furthermore,the current study also analyzes security implications of the ineffectiveness of Islamabads counter-terrorism strategy at domestic, regional and global level, in general and for China,in particular.In the concluding analysis, the study offers viable recommendations to formulate an effective and result-oriented counter-terrorism strategy of Pakistan.