Pedestrian activity on hilly roads introduces a unique set of challenges and considerations for both vehicular traffic and overall road capacity. The presence of pedestrians can lead to alterations in vehicular speed, traffic flow, and road capacity due to several interrelated factors. The present study focuses on examining the effects of pedestrians on vehicular speed and capacity of two-lane hilly road. The study utilized the video-graphic method to collect field data on four different sections of NH-7 in Srinagar city of Uttarakhand. The sites were selected with varying magnitude of gradient, i.e., two sites with a gradient less than 2% and the remaining two sites with a gradient greater than 2%. The primary goal of this study is to examine the effect of pedestrian movements on the capacity and speed of the road for different gradient ranges. The findings indicated that locations with pedestrian movement had lower vehicular speed and roadway capacity compared to sites without pedestrian activity. Moreover, the traffic speed and roadway capacity were observed to be decreasing with an increase in the longitudinal gradient of the road. The study results can be used by transportation engineers and planners to develop a comprehensive understanding of the traffic on hill roads. The results of studying the impact of pedestrians on vehicular speed and road capacity provide valuable insights that can inform policies, improve infrastructure, enhance traffic management, and promote safer and more sustainable transportation systems in urban environments.