A mileage prediction and optimization system (FIG. 1) is disclosed for optimizing the mileage of a vehicle. The mileage prediction and optimization system comprises a prediction and optimization module (300) adapted to determine variation in mileage of the vehicle at least based on the current fuel volume, current speed, current fuel density, the current tire air pressure, the current tire air temperature, current fetched values from an ECU module (700) and the pre-defined mileage data of the vehicle. Further, the prediction and optimization module (300) is adapted to optimize the mileage of the vehicle by reducing variation of fuel density, reducing variation of tire air pressure and informing optimal gear-speed combinations to a user regardless of whether the vehicle is stationary or in motion.