The desirable goal in passenger transportation is moving more people in fewer vehicles. This goal, in respect of road transport, can be attained by encouraging public transport modes like buses by assigning priority. One of the common bus priority measures is provision of reserved bus lanes on major urban roads to facilitate faster movement of buses. This paper is concerned with modification and validation of a recently developed micro simulation model of heterogeneous traffic flow and application of the model to study the impact of provision of reserved bus lanes on urban roads. The impact of introduction of an exclusive bus lane is measured in terms of reduction in speed of other categories of motor vehicles, due to the consequent reduction in road space, over a wide range of traffic volume. The main finding of the simulation experiment is the quantification of the maximum permissible volume to capacity ratio that will ensure a level of service of C for the traffic stream comprising all the motor vehicles, except the buses, on a typical eight lane divided urban road (if an exclusive bus lane is provided under highly heterogeneous traffic conditions, prevailing in Indian cities). Through this study, a framework for justification of providing exclusive bus lane has also been defined. The results of the study indicate that it is possible to introduce exclusive bus lanes on selected urban roads to enhance the level of service of bus, without much of adverse impact on the level of service of other modes of road transport under the stated roadway and traffic conditions. Provision of exclusive road space for buses, will enhance the level of service of buses and this may also result in shift of some of the personal vehicle users to buses. This study is also concerned with estimation of the probable shift of the personal vehicle users to bus due to increase in its level of service after providing exclusive bus lanes. Mode-choice probability curves to depict the probable modal shift of personal vehicle users to bus has been developed, taking the difference in travel times of the two-modes as the basis, to serve as an user friendly, ready-to-refer tool to predict the possible modal shift for a wide range of the values of the involved variables.