Substantial amount of money has been invested by Government of India and several State Governments to improve the level of service of various categories of roads in India. Roads have been widened and strengthened, surface condition has been improved but Level of Service has not been improved as expected because of various socio-economic factors. One of the important factors has been the presence of side friction along Indian rural highways. Existence of road-side markets at regular interval along rural highways is very common in India. These market areas act as pseudo bottleneck points and confusion zones to the through traffic of highways. Interaction among fast moving vehicles, pedestrian and non-motorized local vehicles is very unique phenomenon. Literature review reveals that not much work has been carried out to understand impact of side friction on travel speed and Level of Service. An attempt has been made in the present work to quantify the impact of roadside friction on travel speed and LOS of Indian rural highways. Based on data collected from three study sections, speed-flow curves were developed for various side friction levels and five threshold values for LOS are suggested considering operational speed and freedom of maneuver as measure of effectiveness.