This study aims to investigate the effect of factor such as perceived stress on the academic performance of the students. A sample of 199 university graduates and undergraduates in Rawalpindi and Islamabad was selected as a statistical frame. Instrumentation used for this study is previously validated construct in order to evaluate the effect of factor under study. To determine the relationships between perceived stress and academic performance, correlation coefficient was calculated. Perceived stress was found to have significant negative correlation with academic performance of students. Moreover, the mean stress score among low academic achiever versus high academic achiever as well as low stress level and high stress level group were found to differ significantly. However, stress level among male and female students do not differ significantly whereas engineering students differ significantly from management sciences students based on the perceived stress score. Course load, sleep problem and social activities were the major source of stress affecting academic performance of the students. In nutshell, perceived stress was found important factor that needs university administration, faculty and parent's focus on effective psychoanalysis services along with stress management programs that could be useful for achieving academic success. (Contains 7 tables.)