This comprehensive study was carried out in the urban area of Peshawar, Pakistan, to analyze the Households’ (HHs) demand for improved water and sanitation services. As a capital city, Peshawar has much Push and Pull factors of migration along with all possible environmental and sociological ramifications. Over the past few decades, the natural population growth and the influx of Afghan refugees followed by the recent settlement of IDPs has triggered urban sprawl resulting in an immense pressure on the municipal services. In the absence of proper urban planning, the poorly functioning institutional capacity and the land market are promoting irregulated land transfer and speculation, the households tend to cluster together. This trend has overburdened the carrying capacity of existing infrastructure and the municipal services can no longer cope with the needs of the continuously expanding urban population. Water and sanitation are usually taken into consideration in isolation, however, they are complementary and mostly jointly demanded. In most cases, they cannot be studied in isolation. While designing a project for water and sanitation usually the beneficiaries are ignored altogether, although communities have both the right and obligation to be involved in the planning and implementation of any project and programmes. Limited data is available about the socio-economic condition, municipal services, and the demand-side information of household priorities, preferences and their Willingness to Pay (WTP) for improved water and sanitation services. The weak political commitment, inadequate institutional capacity, poor technology, and scanty financing are some of the major obstacles to acceptable water and sanitation services. In light of the above mentioned problems the present study is a preliminary work and step towards a pluralistic approach to incorporate communal values to analyze the household demand for improved WSS for ensuring better planning in district Peshawar. The Contingent Valuation (CV) survey method with a sample size of six hundred (600) was used to investigate HHs demand for improved Water and Sanitation Services (WSS) through a well-designed questionnaire. Data was collected through the household survey, field observation, and Key Informant Interview (KII). The perceptions of the HHs were evaluated through various statistical tools like satisfaction, priority, and performance indices. The Linear Logistic Model was used to estimate the impact of various influencing factors on the household demand for improved WSS. xiv The findings reveal that majority of HHs (89.8 per cent) are served by Water and Sanitation services Company in Peshawar (WSSP) and have public water tap facilities at home. However, most of the respondents (72 per cent) are not satisfied with these services and have reported poor quality, low pressure, inadequate quantity, unreliability, and distance from the source as the main problems. The study reveals that the lack of funds, paucity of modern tools, improper planning and insufficient skilled staff are the major obstacles in the provision of quality WSS. Majority of the HHs (89 per cent) are willing to pay PKR 328 per month for Improved Water Services (IWS)1 . Policy variables such as the income of the respondents, education, occupation, ownership of the house and household size have a significant impact on household demand for IWS. Regarding sanitation, the analysis shows that a majority of HHs (97 per cent) have latrine facility at home but the latrines are not connected to the sewerage line. In the absence of proper sewerage facilities, 80 per cent respondents report that the existing environmental condition of the area is pathetic and unhygienic. Chocked drains, dysfunctional wastewater treatment plant, absence of the sewerage line, lack of public latrines, inadequate water supply and improper solid waste management are the main problems of the study area. Majority of households (93 per cent) are not satisfied with the existing services and demand for Improved Sanitation Services (ISS)2. Policy variables such as income, education and household employment have a statistically significant impact on household demand for ISS. The study further revealed that a majority of households (452) are willing to pay PKR 220 per month for ISS. This study concludes that a pluralistic approach for incorporation of the communal values is imperative in the planning process for a city like Peshawar. This approach will increase the level of satisfaction of a majority of households, create a sense of ownership among the people, and generate additional revenues for the sustenance of these services. This study also identifies new avenues for further investigation in water and sanitation in the region.