As urban populations and transport demand expand, Pakistani metropolitan centers face traffic congestion and environmental challenges. This research aims to assess carpooling (CP) to alleviate traffic congestion, fuel demand, and pollution. This study was conducted in Islamabad, a fast-growing city with a high percentage of personal cars in Pakistan, to assess the travelers’ perceptions, and public acceptance of CP and determine the effects on traffic congestion, fuel consumption, and CO2 emissions. The investigation of travelers' perceptions towards CP was conducted through a stated preference questionnaire survey. A total of 700 responses from one million population of Islamabad were collected as per Sloven's Formula. SPSS and Smart PLS software were used for data analysis. Various factors influencing peoples’ travel perceptions, mode choice, and tendency to carpool, were categorized to evaluate the relationship between travelers’ perception and the tendency to carpool in the presence of mode choice as a mediating variable. Confirmatory factor analysis was conducted in SMART PLS to refine the number of scale items for each variable. One-way ANOVA, step-wise and mediated multiple regression analysis was conducted in SPSS to check the direct and mediating relationship between different variables. Moreover, the probability of reducing traffic congestion and assessing fuel reduction resulting from CP was also analyzed. The findings imply that travelers’ mode choice acts as a mediator between the relationship between travelers’ perception and tendency to carpool. Furthermore, results predicted that CP might reduce 0.25 million cars on the road, about 33.6% of the total private vehicles. Thereby, saving up to 546,810 barrels per year, about 3.42% of Pakistan's total petrol consumption. The findings of this study could be helpful for transport planners, environmentalists, and policymakers to implement carpool systems. Thus, reducing traffic congestion and harmful CO2 emissions and maintaining a sustainable environment.