By the end of this year, the Himalayan kingdom could become the first nation in the world to completely ban the habit.
Bhutan has already prohibited smoking in 18 of its 20 districts and hopes to outlaw it nationwide by the end of 2003.
For years, the isolated Buddhist nation locked between India and China has invoked the authority of the scriptures to try to deter smokers. But officials say religion alone has not been enough.
"We're pushing both the health and religious aspects to make Bhutan tobacco-free," director of the health department, Gado Tshering, who has campaigned against the habit, said.
"We consider smoking a sin in our religion. Monks and religious people will never smoke."
The capital, Thimphu, and some places surrounding it are now the only spots where the ban does not apply.
Officials say the number of smokers has shot up in recent years as young people took up the habit as a fashion statement.
Today, despite the ban on importing and selling cigarettes and tobacco, it is not uncommon to see people lighting up.
"You can't stop people who want to smoke. All that this ban has done is encourage smuggling"
Smoke clouds the air in snooker bars as young Bhutanese lean over the tables, cigarettes danging from their lips.
"We've banned smoking in public places in 18 districts. But in individual houses or behind a rock we cannot see what people are doing," said Tshering.
"We've made a commitment to the World Health Organisation that Bhutan will be the first country to be tobacco free."
This is not the first time Bhutan has tried to stop smoking.
In 1729, the founder of modern Bhutan, the warrior monk Shabdrung Ngawang Namgyal, enacted the first ban on smoking in public when he outlawed tobacco in government buildings.
But the popularity of smoking has grown over the years and the ban today has resulted in a flourishing grey market in parts of the country with small neighbourhood shops selling foreign cigarettes at a huge premium - about 120 to 150 ngultrum ($2.60-$3.30) a pack. Bhutan produces no tobacco products.
"You can't stop people who want to smoke. All that this ban has done is encourage smuggling," scoffed an artist in Thimphu who did not want to be named.
Locals say the ban has sparked debate but there has been little resistance because smoking still is not as much a part of Bhutanese culture as drinking.