Pakistan relations with Afghanistan have mostly been frail, based on mutual mistrust which has never allowed the two countries to establish closer ties. In post Taliban era, Pakistan recognized Hamid Karzai government and expressed its desire of establishing friendly relations but nature of relationship was fragile and mistrust was dominant. Their bilateral relations during (2001-2008) showed heightened mistrust which inhibited the development of strong and stable relationship and presented a situation of Prisoner‟s Dilemma. Several issues strained their relations and were responsible for widening trust gap. Mistrust in the fight against terrorism, cross border infiltration, blame game, safe havens in FATA and regional factors complicated the situation and halted cooperation between the two neighbors. Pakistan and Afghanistan are security seekers but concrete steps for bringing peace and security are lacking on their part. A friendly and secure Afghanistan is very much important for Pakistan‟s future stability, security and prosperity and vice versa. Mistrust and causes of friction, if not removed, will complicate the process of maintaining friendly relations and threaten regional peace and security. The study therefore, highlights the causes of friction and recommends breaking the Prisoner‟s Dilemma to establish relations based on mutual trust and cooperation.