Since its very inception Pakistan has been facing multiple strategic, diplomatic and economic challenges. With a significant strategic position Pakistan is situated at the doorway to the oil-rich countries of the Middle East and Central Asia and, therefore, it has great potential of becoming a transit economy. One cannot overlook the two-dimensional impact of geographical location; it has advantages as well as challenges. In order to transform these challenges into opportunities and protect one’s own national interests there is always a dire need to devise strategies to maximise the advantages. This article seeks to examine the benefits of Pakistan’s strategic location as well as its internal and external challenges on the same basis.