This research has been conducted to determine agenda-setting function of mass media on the issue of "war on terror" in Pakistan. How do media portray war on terror and how the audience perceives it, was the objective of the study. After finding the approach of the media and audience on "war on terror", results of media approach were matched with that of public opinion to determine a relationship. The research found a positive relationship between media's and audience agenda on war on terror. Effects of agenda setting of Urdu Daily have found more strongly than that of the English Daily. Media and Audience agenda has been assessed based on categories i.e. policy of Pakistan government, militants, terrorism and the US role.