Health indicators of Kerala State such as infant mortality rate (14/ 1000 live births) and life expectancy at birth (71 yr for men and 76 yr for women) are far ahead of the Indian averages (IMR 58, life expectancy men 62 and women 63) and closer to the developed countries. However, tobacco use prevalence is similar to the national average. Smoking is the commonest form of tobacco usage among men in the State whereas chewing tobacco is more common among women and children. Tobacco chewing among men is increasing in Kerala probably due to the smoking ban and industry strategy to focus on smokeless tobacco. Tobacco use is significantly more among the low socio-economic (SE) groups compared to the high SE group. Mortality and morbidity attributed to tobacco is higher among the poorest people in the State. Age adjusted cancer rate of oral cavity and lung cancer has been increasing in the State in recent years. Heart diseases among the young people are increasing in the State. Cancer and heart diseases are chronic illnesses which may pull the individual and the entire family below the poverty line. Tobacco control therefore should be a top priority not only as a health issue but as a poverty reduction issue. Poverty alleviation is one of the major goals of developing economies. No poverty alleviation programme can ignore the potential impoverishment associated with tobacco use. Kerala with a very strong decentralized government has a very good opportunity to address tobacco control as a priority at the grass root level and reduce the impoverishment due to tobacco use.