Headway between vehicles influences the traffic speed and capacity of highway. In a mixed traffic stream, slow, and fast-moving vehicles frequently interact even under low volume conditions which cause variation in the headway maintained by the vehicles. The aim of this study is to understand the different headway characteristics of mixed traffic stream on Indian highways. Further, the research work intends to determine accurate traffic capacity by analyzing the traffic flow characteristics such as dynamic passenger car units (DPCU), traffic speed, flow, and density for each class of vehicle. A set of field data from the National Highways (NH) in Tamil Nadu was collected using the Infra-red sensors. The results reveal that there is a strong association between the micro parameter of traffic flow, the headway, and the capacity of flow expressed in DPCUs. The results from this research work are useful in design, management, and control, of NHs and aid transport engineers, and other agencies to plan the highways.