From last few decades "Tourism" has been world's rapidly growing industry. In Jammu and Kashmir, tourism is an important industry as scope of agricultural and industrial development is limited. Present study investigates the role of tourism in the economic growth of Jammu and Kashmir during the period from 2004-05 to 2012-13. It also analyses the impact of tourism on livelihood as well as on the income and expenditure level of the stakeholders involved in this business. Besides secondary data, study is based on the primary data collected from the four tourist destinations namely, Katra, Patnitop, Gulmarg and Pahalgam of the state. Findings of the study reveal that tourism is one of the important sectors of Jammu and Kashmir. Having bi-directional relationship between tourism and economic growth, tourism contributes significantly to the GSDP of the state. The contribution of tourism in income and employment is found to be significant as the stakeholders involved in this business are earning fair income and also the employment provided by this sector is usually permanent. Moreover, average working hours in the tourism business are more for permanent employees than temporary ones, and so is the average monthly income. Income from tourism has positive and significant impact on the expenditure and investment level of the stakeholders.