This paper is a situational analysis of child labour in Pakistan. Both longitudinal and cross sectional data were used to analyse the incidence of child labour in both the rural and urban areas of the country. A case study based on a field survey of a migrant community living in the metropolis of Karachi was carried out to understand the reasons for a high incidence of child labour. Personal in depth interviews were carried out with the household members, children, community leaders and the principals of the local schools. The results indicated that majority of the children in the school going age neither went to school nor undertook paid employment. The girls were involved in household chores and thus were excluded from the formal sector. There was gender bias in school enrolment where preference was given to the boys compared to the girls. The enrolment level in the government school was lower than in the private school, attributable to the low standards and poor quality of education imparted in the state run school. A policy recommendation based on the results of the study is to introduce a voucher system giving households the freedom to choose the school for their children.