The administration of Khyber Medical University has asked female students to wear the 'Hijab' or veil, while prescribing traditional shalwar-kameez for males.
Norrul Iman, the principal of the university, defended the decision by saying that it will "promote Islamic way of life for the students and the culture of modesty".
The decision has created unrest in majority of about 1,500 students who wanted to continue dressing up in trendy western and local clothes.
None of the female students, who are almost half of the total strength, were ready to speak due to fear of reprisals by extremists.
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The harsh measure is reminiscent of the Taliban's rule in neighbouring Afghanistan where they banned western outfits and used to publicly lash men for trimming beards and women for exposing their ankles.
The dress code implementation is one of several state-sponsored actions which are considered as premeditated steps to target liberal values in Pakistan.
YouTube has already been banned for nearly a year.
It is believed that the decision by the university, located in an area under Taliban influence, was promoted by conservative Jamaat-e-Islami party which is part of ruling coalition led by Pakistan Tehrik-i-Insaf of former cricketer Imran Khan in Khyber-Pakhtunkhwa province.
The decision on Islamic dress code coincided with the Hijab Day being observed today by the Jamaat.
The religio-political party supports the Taliban and has been demanding implementation of strict Shariah laws in Pakistan.