This project aims to model the problem of traffic congestion in the city of Pune, India. The project considers the effect of various socio-economic factors on the traffic and identifies causal relationships between these factors. The factors considered include increasing population, enhanced lifestyle, lowering prices of automobiles, increasing road area, state of public transportation etc. The project also analyzes the current measures put in place the government to reduce traffic problems. Finally, the project recommends policy measures to the local administration to reduce, if not eliminate traffic congestion problem in the city. We have used the System Dynamics approach to build a computer simulation model of the traffic problem in the city. The simulation model builds causal relationships between various key variables related to the problem and identifies feedback loops acting on each other. Further, with the help of hard data and trends in different key variables, the model simulates the behavior of these loops over a period of time. This actual behavior is the base for implementing policy measures and altering the dynamics of the system to get the desired behavior. Upon studying the dynamics of the system, we propose a policy measure to maintain a constant number of vehicles on the road over the next 10 years. We have successfully implemented this policy measure in the model by adding a few new key variables and causal relationships to balance the interacting loops. This model can serve as a tool to test the effect of different policies on the traffic congestion problem which may avoid huge expenses of implementing failed policies on the part of the local administration.