Khyber Pakhtunkhwa has the third largest provincial economy in Pakistan. Khyber Pakhtunkhwa's share of Pakistan's GDP has historically comprised 10.5%, although the province accounts for 11.9% of Pakistan's total population. The part of the economy that Khyber Pakhtunkhwa dominates is forestry, where its share has historically ranged from a low of 34.9% to a high of 81%, giving an average of 61.56%. Currently, Khyber Pakhtunkhwa accounts for 10% of Pakistan's GDP, 20% of Pakistan's mining output and, since 1972, it has seen its economy grow in size by 3.6 times.

After suffering for decades due to the fallout of the Soviet invasion of Afghanistan, today they are again being targeted for a different situation of terrorism.

Agriculture remains important and the main cash crops include wheat, maize, tobacco (in Swabi), rice, sugar beets, as well as fruits are grown in the province.

Some manufacturing and high tech investments in Peshawar has helped improve job prospects for many locals, while trade in the province involves nearly every product. The bazaars in the province are renowned throughout Pakistan. Unemployment has been reduced due to establishment of industrial zones.

Workshops throughout the province support the manufacture of small arms and weapons. The province accounts for at least 78% of the marble production in Pakistan.