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Teacher Education has been transforming throughout the world to cater to the emerging needs of quality education. Significant developments have taken place nationally and internationally in political, economic, and cultural fields, influencing education in general and teacher education in particular. The quality of education depends to a great extent on the quality of teachers. And, the quality of teachers depends on the way they are educated and trained. Pakistan has a vast education sector and a huge teaching force but teacher education in the country has not been keeping pace with modernization and development globally. Teacher education curricula, dissemination, evaluation and implementation revolved around traditional models for decades. However, there has been a growing realization to reform the teacher education system lately. The education policy (2009) of Pakistan indicates such realization on the part of the stakeholders. This chapter reports on an important teacher education reform program, which is based on collaboration between the government of Pakistan and the USAID. The Teacher Education Project (TEP), assisted by USAID, is a reform initiative that aimed at restructuring and modernizing teacher education in Pakistan. This chapter aims to provide insights into the objectives, importance and achievements of the project in terms of shaping the future direction of teacher education in Pakistan. It reports on the substantial structural and policy changes that took place in teacher education under the project. This chapter also highlights the possible challenges in the way of useful implementation and sustainability of this and similar education reform initiatives in Pakistan.