Background: The management of anemia and blood transfusion practices in the ICU have been a subject of controversy. Aims: The aims of this study were 1) To assess the prevalence of anemia and study the association of blood transfusion and mortality in critically ill patients. 2) To compare restrictive transfusion policy (Hb < 7 g/dl) and liberal transfusion policy. (Hb < 10 g/dl). Settings and Design: A matched cohort study was performed in a tertiary care teaching hospital. Materials and Methods: To study the association between blood transfusions and mortality, control patients were those who never received blood during ICU stay. They were selected according to the following matching criteria: Age (± 5 years), sex, APACHE II score (± 5 points), history of cardiac or renal disease and clinical diagnosis. Statistical Analysis Used: The Chi-square test. Results: The incidence of anemia is high in critically ill patients. Anemic patients had a longer duration of stay in the ICU. There is an association between blood transfusion and higher mortality in critically ill patients. A restrictive transfusion policy was associated with lesser mortality. Conclusions: Anemia is associated with increased morbidity reflected by the increased duration of stay in the ICU. Blood transfusion is associated with increased mortality and a restrictive transfusion policy is associated with increased survival.