The regulatory measures have set standard to be met for evaluating environmental cost of a proposed highway. However, these measures do not consider the health effects of increased concentrations of pollutants. This thesis seeks to develop a methodology for estimating the environmental cost of a new highway with a specified alignment. The proposed methodology for estimating the environmental health costs of a highway quantifies the social cost of the emission impacts. An example of a proposed highway parallel to an existing highway is considered in a rural area. The environmental costs consider emissions at the source, dispersion of particles, and population exposure. The total emissions of nitrogen dioxide are estimated using the vehicle-specific approach and the transport of these emissions is estimated with a Gaussian model for pollutant dispersion. The chronic respiratory diseases, asthma, and cardiovascular cases resulting from the dispersion of pollutant are estimated using the concentration exposure relationship. The results are analyzed for factors that influence the effects of emissions, i.e. vehicle volume, vehicle mix, wind direction, wind speed, meteorological conditions, gradient and population density.