Traffic congestion and air pollution are the major problems for most of the Asian major cities. Motor vehicle emissions are the major contributor to air pollution and the existence of poorly maintained diesel engine, old buses and two-stroke engines play a crucial role in the worsening air quality situation. The problem of traffic congestion and uncontrolled vehicle emission make life miserable in Dhaka city, the capital of Bangladesh, causing threat to health and economic loss as well. The study is based on secondary information and aims to explore the existing public transport situation of the city, major transport problems and their causes, and policy failures of government to combat congestion and air pollution level. Dhaka is perhaps the only city of its size (over 9 million population in 2000 sq km) without a well-organised bus system or other mass public transport. Like previous decades, if appropriate policy measure for public transport is not taken at government level to tackle the large amount of travel demand (24 million projected population by 2021), it will be disaster for the city. Among the various causes of congestion and air pollution, the mix of fast moving vehicles with slow moving non-motorised vehicles is the major one. It was also found that the failure of appropriate government policy in different times also encouraged congestion and pollution. The study found rapid bus transit is the most suitable form of public transport for the city and in-time appropriate policy decision and proper implementation for promoting public transport can reduce congestion and air pollution level.