Ephedra foliata, (Gymnosperm) is a pharmaceutically important plant known for the last 5,000 years and has a number of medicinal properties. We describe here for the first time, a method for plant regeneration from callus established from axillary buds as explant, with the aim of optimizing alkaloids production in vitro. The tissue cultures initiated are being maintained for the last 3 years on Murashige and Skoog (Physiol Plant 15:473–497, 1962) medium containing 0.5 mg l⁻¹ each of 2, 4-D and Kin. Maintained callus cultures exhibited regeneration potential and maximum number (23.5 ± 0.44 shoots per culture vessel) of shoots with an average height (4.94 ± 0.23 cm) was achieved on MS medium containing combination of 0.25 mg l⁻¹ each of Kin, BA and 0.1 mg l⁻¹ of NAA. About 84.9 % regenerated shoots were rooted under ex vitro conditions on Soilrite®, if their base was treated with 500 mg l⁻¹ of IBA for 5 min. The rooted plantlets were successfully acclimatized under greenhouse conditions with ≈80 % survival rate. We analyzed alkaloid contents of tissue culture raised plants/callus as affected by the different concentrations and combination of two additives, i.e., L-phenylalanine and IBA. The alkaloid production was higher in the in vitro grown cultures than field-grown plants. Highest alkaloid content was recorded in callus culture on M5 medium having 0.5 mg l⁻¹ each of 2, 4-D and Kin, 100 mg l⁻¹ L-phenylalanine and 5 mg l⁻¹ IBA. The present protocol may be applicable for the large-scale cultivation of E. foliata and selection of cell line having higher secondary metabolite contents of this pharmaceutically important threatened plant species.