Smokeless tobacco is commonly used in south Asia. In addition to causing oral and pharyngeal cancers, its harmful effects are comparable to smoking tobacco. A cross-sectional survey with systematic sampling was conducted in 2010-2011 to investigate smokeless tobacco use in a multi-ethnic, semi-urban population in Islamabad, Pakistan (n = 2030). The prevalence of smokeless tobacco use was 16.0% (21.6% among males and 8.8% among females); 51.7% of smokeless tobacco users were also cigarette smokers. The rate of smokeless tobacco use was comparatively high among Pakhtun males (38.2%) and Sindhi females (22.4%). The associations between smokeless tobacco use and ethnicity, age group, income level and cigarette smoking were statistically significant among male smokeless tobacco users. Of the sample 41.4% (840/2030) had inadequate knowledge about the health problems associated with smokeless tobacco. Appropriate interventions are needed to raise awareness of the health risks and to prevent smokeless tobacco use.