Purpose: A novel coronavirus, SARS-CoV-2 was identified as the cause of COVID-19 eventually led to the declaration of Public health emergency of international concern and a pandemic by WHO due to its exponential global spread. Present study was conducted to investigate the impact of second wave of pandemic on mental wellbeing and social behaviors among university students of Pakistan during this crucial period of COVID-19 infection. Methods: A cross-sectional analytical study was designed to evaluate the psychosocial impact during the current COVID-19 outbreak among the students of The Islamia University of Bahawalpur, Pakistan. Snowball sampling or chain referral sampling procedure was adopted to recruit the participants in the study. Verbal informed consent was taken from all participants before recruitment in the study irrespective of their gender, age and socioeconomic status. Results: Mental health of university students during COVID-19 epidemic was affected to a varying degree revealing that 26.66% were recorded to have mild, 27.15% moderate and 17.04% suffering from severe anxiety out of total 1029 students. Students who were residing in urban areas with parents and having a steady family income were negatively associated and found protective factors against anxiety. However, having a relative or an acquaintance infected with COVID-19 was an independent risk factor for experienced anxiety. Positively associated factors with the level of anxiety symptoms included economic stressors, effects on daily-life, and academic delays whereas social support was negatively correlated with anxiety in COVID-19 related stressors. Conclusion: Public health emergencies and such pandemic are exerting serious psychological impacts on university students. It is recommended that the higher authorities should plan better policies to reduce this impact for the provision of high quality and timely crisis-oriented psychological services to university students.