Fire accidents are causing a huge human death as well as economic losses throughout the world every year. But a novel fire detection and extinguishing system could reduce these losses to a great extent. We are proposing a cost effective and yet very efficient system which has been developed in our laboratory and evaluated while in operation. Our system consists of two units: detection unit and extinguishing unit. For detection purposes we used smoke, IR and temperature sensors. While for extinguishing purposes we used both foam and water. We used a PC to process and control our system through LabVIEW software of National Instrument, USA. The detection unit will send signal through a wireless module to PC if fire is detected. Then PC (LabVIEW) will process the signal and using relay module first of all the electric power and gas lines will be turned off. The extinguishing unit will then release foam or water to extinguish the fire. The system will send SMS to the predefined numbers using GSM module. Our system is location independent as it uses GSM and can be operated from remote location using wireless module. After performance evaluation it was found to be fast and reliable.