The Internet of Things (IoT) is an emerging technology connecting heterogeneous environment devices that is changing the traditional lifestyle into a high-tech lifestyle. These devices can be linked and communicate with each other via the internet. The public transportation system (PTS) plays a vital role in the economy and development of an intelligent city. Many problems have surfaced, such as traffic flow, vehicle protection, vehicle monitoring, best routes, and limited car parks, which can be solved through IoT. The existing traditional transportation system of Peshawar city cannot recognize the routes, time schedules, ticket costs, reservations, current locations, emergency alerts, traffic congestions, and no centralized control system. Thus, this paper proposes the IoT-based Smart Transportation System (IoT-STS) and has categorized it into passenger(s), buses, bus station(s), and terminals. In the Bus module, Bus shares information about the Bus’s current coordinates, vacant seat information, and accident information in case of emergency through the mobile application. In the Bus station, a Liquid Crystal Display is installed, which shows information about the upcoming Buses, the expected arrival time of the Buses, and vacant seat(s) in the buses. Passengers have a mobile application through which they can learn about the current buses on the concerned route through Google Maps, vacant seats in the buses, cancel or book seats, the expected arrival time of the buses, and route change information in case of traffic jams. There are two routes for public transport in Peshawar; after the advancement and proper time management in the current system, the travel time was reduced by 18% on the first route and 21% on the second route. In addition, it reduced fuel consumption to 18% on the first route and 21% on the second route. The IoT-STS illustrate a unique formula for passenger fare charges for the passenger(s) that could promptly pay the fare according to travel distance and fuel price, reducing 34% fare on the first route and 44% on the second route from passengers. In case of route blockage, the information is shared with the server due to the re-routing algorithm. All the upcoming buses will be shifted to the new route, and a proper emergency alert system will be installed in case of an emergency to extend passengers’ chances of survival. The IOT-STS results exhibit cost, fare charges, fuel, and time against the conventional traffic system.