The important aspect that makes the nature of traffic flow stochastic is the randomness inherent in road user (driver) and vehicular characteristics. We give an overview of the development, validation and use of a stochastic traffic-flow simulation model for urban highways with heterogeneous traffic. An appropriate methodology for the collection and extraction of headway data has been suggested. The headways of urban mixed-traffic dominated by smaller vehicles like motorized two-wheelers can be modeled using negative exponential distribution over a wider range of traffic flow. An attempt has also been made to model the traffic flow on a road stretch with bus stops. The random natures of the arrival pattern and dwell time of the buses have been suitably incorporated. © 2003 IEEE.