The residential sector accounts for 46.8% of the total energy consumption in Bhutan. Among the various end uses, cooking is the major energy consuming end use, accounting for about 66% of the residential energy share. The rural population having limited access to electricity and other modern energy sources, fuelwood is the largest single source of energy accounting for about 91% of residential energy use. TERI conducted an extensive survey in Bhutan to evaluate the performance of the cookstoves used in different regions of rural Bhutan. This paper gives detailed account of the energy consumption in the residential energy sector in Bhutan, thermal efficiency measurements of cookstoves and exposure to households’ occupants to carbon monoxide (CO) during cooking. Based on the results, strategies for reducing fuelwood consumption and improving indoor air quality has also been discussed.